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A Model of the Nominal and Real Exchange Rates in Colombia

Author

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  • Javier Gómez

Abstract

Using the Johansen's cointegration techique we develop an empirical model of the nominal and real exchange rates of Colombia. We find that the nominal exchange rate is deremined by the nominal variables and the fundamentals and that the real exchange rate is determined by the fundamentals but neutral to the nominal variables. Changes in the real exchange rates take place through changes in the nominal exchange rate, thus the nominal and the real exchanges are correlated, however, the real exchange rate may not be modified by nominal exchange rate policy because, in the model, the nominal exchange rate of Colombia behaves as if it werw flexible and the nominal anchor were money.

Suggested Citation

  • Javier Gómez, 1999. "A Model of the Nominal and Real Exchange Rates in Colombia," Borradores de Economia 129, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:129
    DOI: 10.32468/be.129
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    Cited by:

    1. Javier G. Gómez-Pineda, 2016. "Inflación de costos: las devaluaciones de los años cincuenta y el brote populista de 1963 / Cost-push inflation: the devaluations of the fifties and the 1963 populist outbreak," Borradores de Economia 14204, Banco de la Republica.

    More about this item

    Keywords

    Exchange rates; Fundamentals; Neutrality;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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