nep-lam New Economics Papers
on Central and South America
Issue of 2005‒10‒04
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Interest Rate Setting and the Colombian Monetary Transmission Mechanism By Carlos Andrés Amaya
  2. Public Expenditures, Bureaucratic Corruption and Economic Development By K Blackburn; R Sarmah

  1. By: Carlos Andrés Amaya
    Abstract: This paper is concerned with interest rate setting by commercial banks and how the transmission of monetary policy is re°ected in these rates. For this purpose we study the case of the Colombian banking industry for the period 1996-2004. Using microdata, the Certi¯cate of Deposit(CD) market and the credit market are studied for a balanced panel of 21 and 16 banks, respectively. The paper motivates the discussion with a theoretical model that explains how banks set their interest rates and how these are a®ected by the policy rate. Overcoming some of the empirical di±culties presented in other studies, this paper deals with them by performing panel unit root tests and panel cointegration tests. The results suggest that the transmission of the policy rate to the CD rate and the credit rate is on average high and quick. Additionally, rates react strongly to in°ation shocks, specially credit rates. Finally, the evidence presented shows the importance of banks' characteristics and in°ation as long-run drivers of interest rates.
    Keywords: Banks, Monetary Policy, Interest Rates, Panel Data
    JEL: C33 E43 E52 E58
    URL: http://d.repec.org/n?u=RePEc:bdr:borrec:352&r=lam
  2. By: K Blackburn; R Sarmah
    Abstract: This paper presents an analysis of the joint, endogenous determination of bureaucratic corruption, economic development and demographic transition. The analysis is based on an overlapping generations model in which reproductive agents mature safely through two periods of life and face a probability of surviving for a third period. This survival probability depends on the provision of public goods and services which may be compromised by corrupt activities on the partof public officials. The dynamic general equilibrium of the economyis characterised by multiple development regimes, transition betweenwhich may or may not be feasible. In accordance with empirical evidence, the model predicts that low (high) levels of development are associated with high (low) levels of corruption and low (high) rates of life expectancy.
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:55&r=lam

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