Crisis, debt and growth: lessons in fiscal and monetary policy: an analysis for the Colombian case

Juan Camilo Cortes Quiñonez

MPRA Paper from University Library of Munich, Germany

Abstract: This article examines the impact of the COVID-19 pandemic on the Colombian economy, focusing on the relationship between GDP, public spending, public debt, and interest rates. Using a Vector Autoregressive (VAR) model, the study finds that public debt has a short-term positive effect on GDP but poses risks to fiscal sustainability in the medium and long term. The research also confirms Wagner’s Law in the Colombian context: economic growth leads to increases in government spending. During the crisis, expansive fiscal and monetary policies were implemented, but they were not always well-coordinated. The relaxation of the fiscal rule and the rise in public borrowing were necessary but have created future vulnerabilities. The article concludes with recommendations focused on strengthening institutional coordination, designing flexible yet responsible fiscal rules, and promoting structural tax reforms to support more equitable and sustainable development.

Keywords: Fiscal policy; Fiscal sustainability; Monetary policy; Public debt; Public spending; VAR model (search for similar items in EconPapers)
JEL-codes: C32 E52 E62 H63 O47 (search for similar items in EconPapers)
Date: 2025-04-22
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128611

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