New Economics Papers
on Central and South America
Issue of 2006‒11‒04
four papers chosen by

  2. BALANCE OF PAYMENTS CRISES UNDER FIXED EXCHANGE RATE IN COLOMBIA: 1938-1967 By Fabio Sánchez; Andrés Fernández; Armando Armenta
  3. The Conquest of South American Inflation By Thomas Sargent; Noah Williams; Tao Zha
  4. Lost Decades: Lessons from Post-Independence Latin America for Today's Africa By Robert H. Bates; John H. Coatsworth; Jeffrey G. Williamson

  1. By: Carolina Gómez Restrepo; Diego Jara Pinzón; Andrés Murcia Pabón
    Abstract: El tamaño relativo de las transacciones de las Administradoras de Fondos de Pensiones (AFP) frente a los demás participantes del mercado cambiario ha sido objeto de preocupación de académicos y ejecutores de política. Las AFP pueden transar grandes volúmenes, lo cual podría influenciar las decisiones de inversión de otros agentes, exacerbando presiones sobre los precios. Este documento estudia el impacto de las operaciones de los Fondos de Pensiones Obligatorias (FPO) sobre el tipo de cambio y el precio de los TES. Los resultados sugieren que los fondos de pensiones son bastante activos tanto en el mercado cambiario como en el de deuda pública interna; más aún, se evidencia una fuerte actividad de trading de corto plazo por parte de algunos fondos en estos mercados. Sin embargo, no se evidencia que los movimientos de distintos fondos estén positivamente correlacionados. Se concluye que sus operaciones tienen un grado de asociación fuerte con el movimiento del tipo de cambio y de las tasas de los TES tasa fija de largo plazo.
    Keywords: AFP, Agentes del Mercado, movimientos del tipo de cambio. Clasificación JEL: D40; D70; E39.
  2. By: Fabio Sánchez; Andrés Fernández; Armando Armenta
    Abstract: Between 1938 and 1967, including the Bretton Woods period after 1947, Colombia pegged its currency to the dollar. Although the exchange rate was fixed, the peso was devaluated more than 12% on six occasions. The devaluation episodes were complex, traumatic, highly politicized and had costly macroeconomic effects. The Bretton Woods agreement stated that countries could only devalue their exchange rate in the presence of fundamental imbalances driven, for example, by structural terms of trade deterioration. However, this paper states that in Colombia, the imbalance in the money market was a key factor in explaining the exchange rate crises during the period. The paper is organized as follows: first, a simple theoretical model of a small open economy with imperfect capital mobility is described in order to examine the possible causes of nominal devaluations; second, a narrative approach is used to describe the economic circumstances that surrounded each of the devaluation episodes; finally, a set of econometric tests are used in order to identify the key variables behind the macroeconomic imbalances that preceded each exchange rate crisis. The results show that the external imbalances were mainly associated with the imbalances in the money market. Terms of trade deterioration account for just a small part of current account crises
    Date: 2006–02–02
  3. By: Thomas Sargent; Noah Williams; Tao Zha
    Abstract: We infer determinants of Latin American hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden Markov model that potentially assigns roles both to fundamentals in the form of government deficits that are financed by money creation and to destabilizing expectations dynamics that can occasionally divorce inflation from fundamentals. Our maximum likelihood estimates allow us to interpret observed inflation rates in terms of variations in the deficits, sequences of shocks that trigger temporary episodes of expectations driven hyperinflations, and occasional superficial reforms that cut inflation without reforming deficits. Our estimates also allow us to infer the deficit adjustments that seem to have permanently stabilized inflation processes.
    JEL: D83 E31 E52
    Date: 2006–10
  4. By: Robert H. Bates; John H. Coatsworth; Jeffrey G. Williamson
    Abstract: Africa and Latin America secured their independence from European colonial rule a century and half apart: most of Latin America after 1820 and most of Africa after 1960. Despite the distance in time and space, they share important similarities. In each case independence was followed by political instability, violent conflict and economic stagnation lasting for about a half-century (lost decades). The parallels suggest that Africa might be exiting from a period of post-imperial collapse and entering a period of relative political stability and economic growth, as did Latin America a century and a half earlier.
    JEL: N0 O10 O54 O55
    Date: 2006–10

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