Colombia experienced a deep recession in 1999-2003. Growth slowed by 4.2%,and investment by 34.6%. Was the severity of the recession due to a ¯nan-cial accelerator mechanism µa la Bernanke, Gertler, and Gilchrist (1999)? Toanswer this question, this paper estimates a dynamic stochastic general...

Using Bayesian estimation techniques, we estimate a small open economyDSGE model with credit-market imperfections for the Colombian economy. Us-ing the estimated model we investigate what are the sources of business cycle°uctuations. We show that balance-sheet e®ects play an important role in...

The adoption of a managed regime assumes that interventions are relatively successful. However, while some authors consider that foreign exchange interventions are ineffective, arguing that domestic and foreign assets are close substitutes, others advocate their use and maintain that their...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

Se analizan tres tipos de modelos para determinar cuándo, bajo un esquema de inflación objetivo, el Banco Central (BC) debe utilizar los encajes como una herramienta de política monetaria óptima. En todos los casos el BC busca minimizar una función objetivo que consta de las desviaciones de...

We analyse three models to determine the conditions under which reserve requirements are used as a part of an optimal monetary policy framework in an inflation targeting regime. In all cases the Central Bank (CB) minimizes an objective function that depends on deviations of inflation from its...

This manuscript can be divided into two main parts. The first one, using a simple example by Minford (2004) and Hatcher (2011), gives the reader a basic introduction to understand the comparison between two monetary-policy regimes: Inflation Targeting (IT) and Price-Level Targeting (PLT). The...

To evaluate whether transparency is beneficial, it is usual to assume that the central bank may choose one of two options, opacity versus truthful communication. However, the monetary policymaker may have incentives to misrepresent private information so as to reduce economic volatility by...

To date, there is still great controversy as to which exchange rate model should be used or which monetary channel should be considered, when measuring the effects of monetary policy. Since most of the literature relies on structural models to address identification problems, the validity of...