Monetary and Fiscal Policy Options for Dealing with External Shocks - Insights from the GIMF for Colombia
This paper utilizes an open-economy New Keynesian overlapping generations model, the Global Integrated Monetary and Fiscal Model (GIMF), to assess the macroeconomic effects of external shocks and the impact of various monetary and fiscal policy responses. The simulations assess the effect of shocks to trade, world income, and risk premia for public debt. The results suggest that under Colombia’s inflation targeting regime, which incorporates exchange rate flexibility and a highly responsive monetary policy, the economy is well poised to adjust to different external shocks. They also suggest that the potential role of fiscal policy in responding to shocks depends critically on financing conditions.
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References listed on IDEAS
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- Douglas Laxton & Michael Kumhof, 2007.
"A Party without a Hangover? On the Effects of U.S. Government Deficits,"
IMF Working Papers
07/202, International Monetary Fund.
- Douglas Laxton & Michael Kumhof, 2007. "A Party without a Hangover? On the Effects of U.S. Government Deficits," 2007 Meeting Papers 676, Society for Economic Dynamics.
- Lisandro Abrego & Pär Österholm, 2010. "External Linkages and Economic Growth in Colombia: Insights from a Bayesian VAR Model," The World Economy, Wiley Blackwell, vol. 33(12), pages 1788-1810, December.
- Pär Österholm & Lisandro Abrego, 2008. "External Linkages and Economic Growth in Colombia; Insights from A Bayesian VAR Model," IMF Working Papers 08/46, International Monetary Fund.
- Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," BORRADORES DE ECONOMIA 003603, BANCO DE LA REPÚBLICA.
- Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation of Inflation Targeting in Colombia," Borradores de Economia 202, Banco de la Republica de Colombia.
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