Purchasing power parity in Colombia, 1981-2018
DOI:
https://doi.org/10.18041/1657-2815/libreempresa.2019v16n1.5908Keywords:
Exchange rate, dollar, libor, Central bank, appreciation, depreciation, correlationAbstract
After analyzing four periods: 1968-1990, 1991-2000, 2000-2006 y 2007-2018, marked by changes in the management of the exchange rate, peso/dolar, by the Banco de la Republica and government economic policy, econometric techniques allow us to conclude that despite the increasing opening of the Colombian economy, since 1991, the liberalization of the foreign exchange market and the flow of capital, the parity began to be fulfilled to the extent that capital markets and the economy was consolidated in the process of opening: gradually during the third period and evidently during the last one amid opening of the Colombian economy. Johansen cointegration tests and EGARCH regresions were used. A detailed study of statistics and economic policy proves that the slowness in meeting the parity rule, which took more than a decade, was due to the fact that the Colombian central bank always intervened in the market to stimulate the depreciation of the peso: crawling-peg, until 1991 and exchange rate band until 1999. In addition, in recent years there have been changes in the direction of the flow of international capital to Colombia that have altered the exchange rate more strongly than the difference in interest rates.
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