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Output Fluctuations and Monetary Shocks: Evidence from Colombia

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  • Carmen M. Reinhart

    (International Monetary Fund)

  • Vincent R. Reinhart

    (International Monetary Fund)

Abstract

Using annual data for Colombia over the last 30 years, we test opposing theories that explain macroeconomic fluctuations: the neoclassical synthesis, which posits that in the presence of temporary price rigidity an unanticipated monetary expansion produces output gains that erode over time with increases in the price level; and an alternative explanation, which focuses on "real" technological or preference shocks as the sources of output changes. Coefficients from this system are used to examine the long-run neutrality of nominal quantities with respect to permanent movements in the money stock and the short-run sensitivity of output to inflation.

Suggested Citation

  • Carmen M. Reinhart & Vincent R. Reinhart, 1991. "Output Fluctuations and Monetary Shocks: Evidence from Colombia," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 705-735, December.
    • Handle: RePEc:pal:imfstp:v:38:y:1991:i:4:p:705-735
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    Cited by:

    1. Juan Carlos Echeverry G., 1996. "Short Run Savings Fluctuations And Export Shocks.Theory And Evidence For Latin-America," Borradores de Economia 3498, Banco de la Republica.
    2. Calvo, Guillermo A & Vegh, Carlos A, 1996. "Disinflation and Interest-Bearing Money," Economic Journal, Royal Economic Society, vol. 106(439), pages 1546-1563, November.
    3. Ansari, M. I. & Ahmed, S. M., 2007. "Does money matter? Evidence from vector error-correction for Mexico," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(1), pages 185-202, September.
    4. Mr. Joe Crowley, 1997. "The Effects of Forward-Versus Backward-Looking Wage Indexationon Price Stabilization Programs," IMF Working Papers 1997/038, International Monetary Fund.
    5. Carlos Esteban Posada P., 1995. "Dinero, Interes, Inflacion Y Fluctuaciones Economicas En Colombia Desde 1958," Borradores de Economia 2365, Banco de la Republica.
    6. Maria Soledad Martinez Peria, 2002. "The Impact of Banking Crises on Money Demand and Price Stability," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-1.
    7. Alexander W. Hoffmaister & Carlos A. Végh, 1996. "Disinflation and The Recession-Now-versus-Recession-Later Hypothesis: Evidence from Uruguay," IMF Staff Papers, Palgrave Macmillan, vol. 43(2), pages 355-394, June.
    8. Gonzalo Hernández, 2011. "Terms of Trade and Output Fluctuations in Colombia," UMASS Amherst Economics Working Papers 2011-04, University of Massachusetts Amherst, Department of Economics.
    9. Fernández Andrés, 2003. "Reformas estructurales, impacto macroeconómico y política monetaria en Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, March.
    10. Jesus Otero, 2001. "Coffee export booms and monetary disequilibrium: some evidence for Colombia," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 267-276.
    11. Raju, Sudhakar S. & Melo, Alberto, 2003. "Money, real output, and deficit effects of coffee booms in Colombia," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 963-983, December.
    12. Kamas, Linda, 1995. "Monetary policy and inflation under the crawling peg: Some evidence from VARs for Colombia," Journal of Development Economics, Elsevier, vol. 46(1), pages 145-161, February.
    13. Carmen M. Reinhart & Vincent R. Reinhart, 1993. "Output Fluctuations and Monetary Shocks in Colombia: Reply to García," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 876-877, December.
    14. Rasaki, Mutiu Gbade & Malikane, Christopher, 2015. "Macroeconomic shocks and fluctuations in African economies," Economic Systems, Elsevier, vol. 39(4), pages 675-696.
    15. Ansari, M. I., 1996. "Monetary vs. fiscal policy: Some evidence from vector autoregression for India," Journal of Asian Economics, Elsevier, vol. 7(4), pages 677-698.
    16. José R Sánchez-Fung, 2000. "Money Demand, PPP and Macroeconomic Dynamics in a Small Developing Economy," Studies in Economics 0015, School of Economics, University of Kent.
    17. Luis Eduardo Arango Thomas & Edison Henao Atehortúa, 1995. "Innovaciones monetarias y fluctuaciones del producto en Colombia," Ensayos de Economía 9515, Universidad Nacional de Colombia Sede Medellín.
    18. Joseph Joyce & Linda Kamas, 1997. "The relative importance of foreign and domestic shocks to output and prices in Mexico and Colombia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 458-478, September.
    19. Clavijo, Sergio, 1994. "Relative price and inflation uncertainty in Colombia: A case of chronic moderate inflation 1970-1990," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 9(1), pages 119-136.

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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