Macroprudential Policies in a Commodity Exporting Economy

Colombia, like other Emerging Market economies, is a small open and commodity exporter economy. The predominant type of the commodity exported has varied, from coffee in the past century to oil in the current one. Nonetheless the importance of the commodity exporting sectors for the Colombian business cycle is prominent. In the last 40 years, empirical evidence shows a strong and positive association between the cyclical component of the real price of Colombian exports and the cyclical component of real GDP. Periods of high export prices coincide with economic booms, while periods of lower than usual prices are associated with recessions. In addition, besides contributing significantly to the GDP cycle volatility, the effects of these shocks are widespread as they affect real variables, such as consumption and investment, as well as other financial variables, such as credit.Full publication: "http://ssrn.com/abstract=2844203" Macroprudential Policy