Financial Inefficiency and Real Business Cycle in Colombia

Camilo Zea ()

Borradores de Economia from Banco de la Republica de Colombia

Abstract: In a dynamic, stochastic, general equilibrium model,we explore the optimal response of the inhabitans of a closed economy to an inefficient ad hoc financial system that in its intermediation duty looses a fraction of aggregate savings which otherwise would become aggregate investment. The incidence over the cycle of shocks to average financial inefficiency and technology is analyzed, as well as the steady state welfare gain of a reduction in average financial inefficiency. The descriptive power of the model is assessed with Colombian data between 1970 and 1992. The results in the paper suggest that the model's predictions are largely consistent with aggregate behavior of the Colombian economy, making it possible to explore several issues of financial liberalization and deepening.

Keywords: Business Cycles; Financial Inefficiency; Artificial Economy. (search for similar items in EconPapers)
JEL-codes: E32 E37 E22 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mfd and nep-rmg

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Persistent link: http://EconPapers.repec.org/RePEc:bdr:borrec:127

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