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Media bias and central bank response. Evidence from the nominal exchange rate behavior in Colombia


  • Rodrigo Taborda



Colombia introduced a market-determined Nominal Exchange Rate (NER) with the US Dollar in 1991, after more than 20 years of controlled and multiple exchange rates. The first nine years the NER was set by an exchange rate band system, since 1999 the exchange rate is determined in a dirty float" market. The behavior (revaluation / devaluation) of the NER is constantly reported in news, editorials and op-eds of major newspapers of the nation. This paper shows that there is media bias in favor of reporting a revaluation episode in contrast to a devaluation one. At the same time Colombia´s central bank allegedly intervenes in the exchange rate market to reduce volatility. However, it is also shown that the central bank buys US dollars to lessen a revaluation event as a response to the media bias and not volatility. It is also found that the media bias was higher during the exchange rate band system in contrast to the free market period. "

Suggested Citation

  • Rodrigo Taborda, 2011. "Media bias and central bank response. Evidence from the nominal exchange rate behavior in Colombia," Documentos de Trabajo 009153, Universidad del Rosario.
  • Handle: RePEc:col:000092:009153

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    References listed on IDEAS

    1. Corneo, Giacomo, 2006. "Media capture in a democracy: The role of wealth concentration," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 37-58, January.
    2. Matthew Gentzkow & Jesse M. Shapiro, 2008. "Competition and Truth in the Market for News," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 133-154, Spring.
    3. Juan José Echavarría & Mauricio Villamizar & Diego Vásquez, 2010. "Impacto de las intervenciones cambiarias sobre el nivel y la volatilidad de la tasa de cambio en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 28(62), pages 12-69, June.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, March.
    5. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845, June.
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    More about this item


    Colombia; Nominal Exchange Rate (NER); Negative Binomial Regression Model (NBRM); count data; probit model; central banking; news bias;

    JEL classification:

    • A19 - General Economics and Teaching - - General Economics - - - Other
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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