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Evolution of the Colombia peso, within the currency bands, nonlinearity analysis and stochastic modelling

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  • Alejandro Revéis

Abstract

This paper studies the behavior of the Colombian Peso exchange rate against the US dollar for the period in which a currency band as prevailing (January 1994 - Sept 1999). A descriptive analysis, which encompasses monetary policy implementation, a description of the market structure and participants, as well as the evolution of the foreign exchange rate is presented. Because a linear relationship fails to account for the evolution of the nominal exchange rate in terms of the real sector supply and demand and financial system´s foreign exchange positions, neural networks techniques are used in order to get some insight on the non-linearity tests of the time series. Consequently, statistical tests- including non-linearity tests- are performed in order to further examine the properties of the returns data and an analysis of a three-volatility-regime stochastic model with mean reversion fitted to the data in prior work is expanded.

Suggested Citation

  • Alejandro Revéis, 2002. "Evolution of the Colombia peso, within the currency bands, nonlinearity analysis and stochastic modelling," Revista de Economía del Rosario, Universidad del Rosario, June.
    • Handle: RePEc:col:000151:002681
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    File URL: http://revistas.urosario.edu.co/index.php/economia/article/view/1007/906
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    More about this item

    Keywords

    Exchange rates; non linearity; stochasting modelling; monetary policy;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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