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Item Open Access4GM: A New Model for the Monetary Policy Analysis in ColombiaGonzález-Gómez, Andrés; Guarín-López, Alexander; Rodríguez, Diego; Vargas-Herrera, Hernando; Banco de la República - ColombiaThis paper introduces 4GM, a semi-structural model for monetary policy analysis and macroeconomic forecasting in Colombia. This model is based on a New-Keynesian rational expectation framework for an oil-exporting small open economy. In this paper, we present the model structure and examine the response of its variables to domestic, foreign and oil-price shocks. Further, we assess 4GM in terms of its historical shock decomposition and its out-of-sample forecasting.Documentos de Trabajo RIEC - No. 31, 2020-02-28Item Open Access
A trade-off from the future: How risk aversion may explain the demand for illiquid assetsFerraz, Eduardo; Mantilla, César; Universidad del RosarioWe use a three-period model adopting a recursive definition of consumption to explore the optimal delegation that a present self, aware that her near-future self is present-biased but better informed, will make to protect her far-future self against income shocks. The model captures the present self's trade-off between using commitment mechanisms, restricting the near-future self's agency through illiquid savings, and profiting from the near-future self's better information about future shocks. Our main result states that agents with higher risk aversion can cover better against utility losses from time-inconsistent consumption through the commitment mechanism. Given the evidence of women being more risk-averse than men, this result provides the micro-foundation for the gender gap in adopting financial commitment devices, especially among single individuals.Documentos de Trabajo RIEC - No. 97, 2022-09-13Item Open AccessAnálisis macroeconómico de los impactos sectoriales del cambio climático en ColombiaAlvarez-Espinoza, Andrés Camilo; Calderón Díaz, Silvia Liliana; Romero Otálora, Germán; Ordoñez, Alejandro; Departamento Nacional de Planeación - ColombiaDocumentos de Trabajo RIEC - No. 58, 2020-06-19Item Open AccessAproximación a la discriminación racial en Cali: ¿se asignan salarios por color de piel?Maya Scarpetta, Nathalia; Universidad de los AndesDocumentos de Trabajo RIEC - No. 28, 2020-02-26Item Open AccessAssessing the Impact of COVID-19 on Trade: a Machine Learning Counterfactual AnalysisDueñas, Marco; Ortiz, Víctor; Riccaboni, Massimo; Serti, Francesco; Universidad Jorge Tadeo LozanoBy interpreting exporters’ dynamics as a complex learning process, this paper constitutes the first attempt to investigate the effectiveness of different Machine Learning (ML) techniques in predicting firms’ trade status. We focus on the probability of Colombian firms surviving in the export market under two different scenarios: a COVID-19 setting and a non-COVID-19 counterfactual situation. By comparing the resulting predictions, we estimate the individual treatment effect of the COVID-19 shock on firms’ outcomes. Finally, we use recursive partitioning methods to identify subgroups with differential treatment effects. We find that, besides the temporal dimension, the main factors predicting treatment heterogeneity are interactions between firm size and industry.Documentos de Trabajo RIEC - No.79, 2021-04-09Item Open AccessAn Auction-Based Test of Private Information in an Interdealer FX Market(Banco de la República de Colombia, 2018-09-26) Bonaldi, Pietro; Villamizar-Villegas, MauricioThere are several financial markets where dealers trade a large share of total volume, while also having access to periodic auctions of the same asset conducted by a third party. For such a market, we derive a test of private information about the value of the asset that combines data on both bidding behavior and market trades. Our approach is to test for private versus common values, as defined in auction theory. We use changes in trading prices of extreme bidders before and after the auction to test the null hypothesis of private values (no private information) against the alternative of common values (private information). Additionally, we use a regression discontinuity design where we compare the behavior of dealers bidding right below and right above the auction’s cutoff price to control for inventory effects, understood here as decreasing marginal valuations as functions of inventory. Our case study are foreign exchange auctions conducted by the Central Bank of Colombia during the period 2008-2014, and the corresponding interdealer market for the Colombian peso against the US dollar. Overall, the data does not reject the null hypothesis of private values. Specifically, information about other bidders’ valuations has no significant effect on trading prices, not even shortly after the auction takes place.Documentos de Trabajo RIEC - No. 1, 2018-09-26Item Open AccessBank Market Power and Firm Finance: Evidence from Bank and Loan Level DataTamayo, Cesar E.; Gomez-Gonzalez, Jose Eduardo; Valencia, Oscar; Banco de la República - Colombia; Universidad EAFITWe present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period –even as concentration increased– but decreased thereafter. Using a unique combination of loan, firm and bank-level datasets we are also able to show that banks loosing overall market power –measured by the average price-cost margin– decrease interest rates to small firms, but increase rates to firms with which they have the oldest credit relationships. This suggests (i) the existence of market power that is specific to the bank-firm relationship (i.e., informational lock-in and hold-up problems due to switching costs), and (ii) that size may be capturing other firm attributes such as observable risk, scale effects or implicit collateral.Documentos de Trabajo RIEC - No. 20, 2019-08-29Item Open AccessBayesian Combination for Inflation Forecasts: The Effects of a Prior Based on Central Banks’ EstimatesMelo-Velandia, Luis Fernando; Loaiza, Rubén; Villamizar-Villegas, Mauricio; Banco de la República - ColombiaTypically, central banks use a variety of individual models (or a combination of models) when forecasting inflation rates. Most of these require excessive amounts of data, time, and computational power; all of which are scarce when monetary authorities meet to decide over policy interventions. In this paper we use a rolling Bayesian combination technique that considers inflation estimates by the staff of the Central Bank of Colombia during 2002-2011 as prior information. Our results show that: 1) the accuracy of individual models is improved by using a Bayesian shrinkage methodology, and 2) priors consisting of staff's estimates outperform all other priors that comprise equal or zero-vector weights. Consequently, our model provides readily available forecasts that exceed all individual models in terms of forecasting accuracy at every evaluated horizon.Documentos de Trabajo RIEC - No. 8, 2014-11-20Item Open AccessBounded learning by doing, inequality, and multi-sector growth: A middle-class perspective.(2018-07) Desdoigts, Alain; Jaramillo, Fernando; Universidad del RosarioThis study presents a multisector model of middle-class-led economic growth, whereby, on the one hand, the middle class plays a key role in determining technical progress, while, on the other hand, both its size and income share are the result of past economic growth. Learn- ing by doing, which is assumed to be sector-speci c, bounded from above, and constrained by a minimum scale restriction, is the primary source of productivity gains. The emphasis is then placed on the entire income distribution, which a¤ects the composition of demand -span of goods consumed- and in turn, the speed and the extent of the learning process in the set of goods produced. The model exhibits an inverted-U relationship between inequality and economic growth, which re ects the following trade-o¤: An economy cannot learn both quickly and simultaneously in a wide range of sectors. It is constrained in this respect by its income/skill distribution and the size of its labor force, with consequences on growth-enhancing strategies by means of income redistributions.Documentos de Trabajo RIEC - No. 4, 2018-07Item Open AccessBrechas de Género en el trabajo Doméstico y de Cuidado No Remunerado en ColombiaOspina-Cartagena, Vanessa; García-Suaza, Andrés; Universidad del RosarioDocumentos de Trabajo RIEC - No. 52, 2020-06-16Item Open AccessBuying a Blind Eye: Campaign Donations, Forbearance, and Deforestation in ColombiaHarding, Robin; Prem, Mounu; Ruiz, Nelson A.; Vargas, David L.; Universidad del RosarioWhile existing work has demonstrated that campaign donations can buy access to benefits such as favorable legislation and preferential contracting, we highlight another use of campaign contributions: buying forbearance. Specifically, we argue that in return for campaign contributions, Colombian mayors who rely on donor-funding (compared to those who do not) choose not to enforce sanctions against illegal deforestation activities. Using a regression discontinuity design we show that deforestation is significantly higher in municipalities that elect donor-funded as opposed to self-funded politicians. Further analysis shows that only part of this effect can be explained by differences is contracting practices by donor-funded mayors. Instead, evidence from analysis of fire clearance, and of heterogeneity in the effects according to the presence of alternative formal and informal enforcement institutions, supports the interpretation that campaign contributions buy forbearance from enforcement of environmental regulations.Documentos de Trabajo RIEC - No. 84, 2021-08-17Item Open AccessCadenas globales de valor, crecimiento y protección arancelaria en Colombia(Banco de la República de Colombia) Echavarría-Soto, Juan José; Giraldo, Iader; Jaramillo, Fernando; Universidad del Rosario; Colegio de Estudios Superiores de Administración, CESADocumentos de Trabajo RIEC - No. 9, 2019-07-08Item Open AccessCalidad del empleo agregado, formal e informal: un análisis para la economía colombiana en el periodo 2007 - 2019Montoya-Arbelaez, Jaime Alberto; Jurado, Andres Julian; Universidad de AntioquiaDocumentos de Trabajo RIEC - No. 95, 2022-08-22Item Open AccessChanges in mobility and socioeconomic conditions in Bogotá city during the COVID-19 outbreakDueñas, Marco; Campi, Mercedes; Olmos, Luis; Universidad Jorge Tadeo LozanoWe analyze mobility changes following the implementation of containment measures aimed at mitigating the spread of COVID-19 in Bogotá, Colombia. We characterize the mobility network before and during the pandemic and analyze its evolution and changes between January and July 2020. We then link the observed mobility changes to socioeconomic conditions, estimating a gravity model to assess the effect of socioeconomic conditions on mobility flows. We observe an overall reduction in mobility trends, but the overall connectivity between different areas of the city remains after the lockdown, reflecting the mobility network's resilience. We find that the responses to lockdown policies depend on socioeconomic conditions. Before the pandemic, the population with better socioeconomic conditions shows higher mobility flows. Since the lockdown, mobility presents a general decrease, but the population with worse socioeconomic conditions shows lower decreases in mobility flows. We conclude deriving policy implications.Documentos de Trabajo RIEC - No. 62, 2020-09-01Item Open AccessChile’s Missing Students: Dictatorship, Higher Education and Social MobilityBautista, María Angélica; González, Felipe; Martínez, Luis R.; Muñoz, Pablo; Prem, Mounu; Universidad del RosarioHostile policies towards higher education are a prominent feature of authoritarian regimes. We study the capture of higher education by the military dictatorship of Augusto Pinochet in Chile following the 1973 coup. We find three main results: (i) cohorts that reached college age shortly after the coup experienced a large drop in college enrollment as a result of the systematic reduction in the number of openings for incoming students decreed by the regime; (ii) these cohorts had worse economic outcomes throughout the life cycle and struggled to climb up the socioeconomic ladder, especially women; (iii) children with parents in the affected cohorts also have a substantially lower probability of college enrollment. These results demonstrate that the political capture of higher education in non-democracies hinders social mobility and leads to a persistent reduction in human capital accumulation, even after democratization.Documentos de Trabajo RIEC - No. 42, 2020-05-15Item Open AccessClimate change: policies to manage its macroeconomic and financial effectsBernal-Ramirez, Joaquin; Ocampo, José Antonio; Banco de la República - ColombiaIt is increasingly recognized that climate change generates major macroeconomic and financial risks. There are physical risks associated to the disasters generated by hydrometeorological events and to gradual but persistent changes in temperatures that have structural impacts on economic activity, productivity and incomes. Additionally, the process of adjustment towards a lower-carbon economy, prompted by changes in climate-related policies, technological disruptions and changes in consumer preferences, generates transition risks. After a brief analysis of the macroeconomic, fiscal and tax policies to manage these risks, this paper concentrates on: (i) how financial policies can help improve transparency and climate-related risk disclosure in financial institutions’ balance sheets and assets prices,particularly with appropriate prudential regulation and supervision; and (ii) how those risks could be taken into account in monetary policy and central banks’ balance sheets and operations. The paper ends with some reflections on the Covid-19 pandemic and the will for a “green” recovery.Documentos de Trabajo RIEC - No. 63, 2020-09-17Item Open AccessCompetition policy and Industrial property: relationship through panel data approach 2007 – 2015Herrera Saavedra, Juan Pablo; Lozano Maturana, Ginette; Campo-Robledo, Jacobo; Parra Ochoa, Catalina; Superintendencia de Industria y Comercio - ColombiaIn the last century, the relation between competition and innovation has been a subject of particular interest, considering the important role that technological progress plays on economic growth and social welfare. Moreover, for several decades, the interest and discussion in regards to this matter has been the focus of heated debates among economists, jurists; and, most notably, among Competition and Industrial Property Authorities, since competition and innovation are the main axes in any modern approach to industrial policy. This paper examines the relation between competition and innovation, based on the estimation of panel data models for 75 countries between 2007 and 2015. The results show an inverted-U relation between innovation and competition. In other words, increases in competition generates innovation to a certain level (turning point) where the effect of competition on innovation is negative. This is consistent with Aghion et al. (2005) approach. The results are robust to different variables used as a proxy for innovation.Documentos de Trabajo RIEC - No. 26, 2019-12-17Item Open AccessComposición de la base de inversionistas extranjeros en el mercado de deuda pública local y variaciones en la sensibilidad de las condiciones financieras domésticasMurcia, Andrés; García-Andrade, Sebastián; Banco de la República - ColombiaDocumentos de Trabajo RIEC - No. 87, 2022-02-18Item Open AccessA Comprehensive History of Regression Discontinuity Designs: An Empirical Survey of the last 60 YearsVillamizar-Villegas, Mauricio; Pinzón-Puerto, Freddy A.; Ruiz-Sánchez, María Alejandra; Banco de la República - ColombiaIn this paper we detail the entire Regression Discontinuity Design (RDD) history, including its origins in the 1960's, and its two main waves of formalization in the 1970's and 2000's, both of which are rarely acknowledged in the literature. Also, we dissect the empirical work into fuzzy and sharp designs and provide some intuition as to why some rule-based criteria produce imperfect compliance. Finally, we break the literature down by economic field, highlighting the main outcomes, treatments, and running variables employed. Overall, we see some topics in economics gaining importance through time, like the cases of: health, finance, crime, environment, and political economy. In particular, we highlight applications in finance as the most novel. Nonetheless, we recognize that the field of education stands out as the uncontested RDD champion through time, with the greatest number of empirical applications.Documentos de Trabajo RIEC - No. 38, 2020-04-20Item Open AccessConstrucción de la matriz de contabilidad social de agua como insumo económicoAlvarez-Espinoza, Andrés Camilo; Romero Otálora, Germán; Riveros Salcedo, Leidy Cáterin; Melo Leon, Sioux Fanny; Ordoñez, Daniel; Departamento Nacional de Planeación - ColombiaDocumentos de Trabajo RIEC - No. 57, 2020-06-17