Modelling official and parallel exchange rates in Colombia under alternative regimes: a non-linear approach (Corrected version)

Citation data:

UNIVERSIDAD DEL ROSARIO, BORRADORES DE INVESTIGACIÓN, ISSN: 0124-4396, No: 003232

Publication Year:
2000
Repository URL:
http://repository.urosario.edu.co/handle/10336/11301; http://repository.urosario.edu.co/handle/10336/10866
RePec URLs:
https://ideas.repec.org/p/col/000091/003232.html; https://ideas.repec.org/p/col/000091/003231.html; https://ideas.repec.org/p/ams/cdws01/po2.html
Author(s):
Milas, Costas; Otero, Jesus
Publisher(s):
Facultad de Economía; Universidad del Rosario. Facultad de Economía; Universidad del Rosario; Editorial Universidad del Rosario
Tags:
332.456; Cambio exterior::Colombia; Tasas de interés::Colombia; Política monetaria::Colombia; Parallel market; Cointegration; Non-linear error correction models; Colombia; Parallel market, cointegration, non-linear error correction models, Colombia; Cambio exterior -- Colombia -- Modelos econométricos; Tasas de Interés -- Colombia -- Modelos econométricos; Política monetaria -- Colombia
paper description
We examine the long-run relationship between the parallel and the official exchange rate in Colombia over two regimes; a crawling peg period and a more flexible crawling band one. The short-run adjustment process of the parallel rate is examined both in a linear and a nonlinear context. We find that the change from the crawling peg to the crawling band regime did not affect the long-run relationship between the official and parallel exchange rates, but altered the short-run dynamics. Non-linear adjustment seems appropriate for the first period, mainly due to strict foreign controls that cause distortions in the transition back to equilibrium once disequilibrium occurs