The Colombian Banking Crisis: Macroeconomic Consequences And What To Expect
While in the early nineties Colombia grew at rates exceeding 4% and was catalogued as one of the top emerging markets, in 1999 its economy fell 4%, its exchange rate regime (a target zone) collapsed and by June of 2000 its unemployment level peaked at 20.4%. This turn of events is clearly associated to an episode of financial distress and a troubled intermediary sector that has haunted the Colombian economy in the late 1990’s. The purpose of this paper is to understand the macroeconomic consequences of the recent financial crisis in Colombia. I solve, calibrate and simulate a simple version of the optimal growth model where banks absorb real resources from the economy and are also vulnerable to crises. The results are useful because they replicate the recent behavior of several macroeconomic variables in Colombia. Moreover, they give some insight into what should be expected from these variables in the near future. There are two fundamental take aways. First, the negative wealth and welfare eﬀects of the Colombian fi- nancial crisis are non-negligible and long lasting (five years approximately). Second, the data suggests that the crisis which permeated the Colombian financial system since the last months of 1997 or first months of 1998 has been deepened by another adverse financial shock that hit the Colombian intermediary sector in mid/late 1999.
|Date of creation:||30 Sep 2000|
|Date of revision:|
|Contact details of provider:|| |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bhattacharya, Joydeep & Huybens, Elisabeth & Guzman, Mark G. & Smith, Bruce D., 1997.
"Monetary, Fiscal, and Bank Regulatory Policy in a Simple Monetary Growth Model,"
Staff General Research Papers
5136, Iowa State University, Department of Economics.
- Joydeep Bhattacharya & Mark G. Guzman & Elisabeth Huybens & Bruce D. Smith, 1995. "Monetary, Fiscal, and Bank Regulatory Policy in a Simple Monetary Growth Model," Working Papers 9501, Centro de Investigacion Economica, ITAM.
- Edwards, Sebastian & Vegh, Carlos A., 1997.
"Banks and macroeconomic disturbances under predetermined exchange rates,"
Journal of Monetary Economics,
Elsevier, vol. 40(2), pages 239-278, October.
- Sebastian Edwards & Carlos A. Végh, 1997. "Banks and Macroeconomic Disturbances Under Predetermined Exchange Rates," CEMA Working Papers: Serie Documentos de Trabajo. 115, Universidad del CEMA.
- Sebastian Edwards & Carlos A. Vegh, 1997. "Banks and Macroeconomics Disturbances under Predetermined Exchange Rates," NBER Working Papers 5977, National Bureau of Economic Research, Inc.
- Harold L. Cole & Lee E. Ohanian, 2001.
"Re-Examining the Contributions of Money and Banking Shocks to the U.S. Great Depression,"
in: NBER Macroeconomics Annual 2000, Volume 15, pages 183-260
National Bureau of Economic Research, Inc.
- Harold L. Cole & Lee E. Ohanian, 2000. "Re-examining the contributions of money and banking shocks to the U.S. Great Depression," Staff Report 270, Federal Reserve Bank of Minneapolis.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998.
"Paper Tigers? A Model of the Asian Crisis,"
NBER Working Papers
6783, National Bureau of Economic Research, Inc.
- Diaz-Gimenez, Javier & Prescott, Edward C. & Fitzgerald, Terry & Alvarez, Fernando, 1992.
"Banking in computable general equilibrium economies,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 16(3-4), pages 533-559.
- Javier Diaz-Gimenez & Edward C. Prescott & Terry J. Fitzgerald & Fernando Alvarez, 1992. "Banking in computable general equilibrium economies," Staff Report 153, Federal Reserve Bank of Minneapolis.
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999.
"The Twin Crises: The Causes of Banking and Balance-of-Payments Problems,"
American Economic Review,
American Economic Association, vol. 89(3), pages 473-500, June.
- Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
- Reinhart, Carmen & Kaminsky, Graciela, 2000.
"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
- V. V. Chari & Larry E. Jones & Rodolfo E. Manuelli, 1995. "The growth effects of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 18-32.
- Bruce D. Smith & John H. Boyd, 1998.
"The evolution of debt and equity markets in economic development,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(3), pages 519-560.
- John H. Boyd & Bruce D. Smith, 1995. "The evolution of debt and equity markets in economic development," Working Papers 542, Federal Reserve Bank of Minneapolis.
- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
- Bernanke, Ben S, 1983.
"Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression,"
American Economic Review,
American Economic Association, vol. 73(3), pages 257-76, June.
- Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
- Asli DemirgÃ¼Ã§-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises; Evidence From Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- repec:idb:wpaper:321 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:col:000094:003573. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)
If references are entirely missing, you can add them using this form.