Long-Term External Position and Equilibrium Real Exchange Rate in Colombia

Jair Ojeda-Joya and Jhon Torres ()

Lecturas de Economía, 2012, issue 77, 9-52

Abstract: This paper calculates an equilibrium level for Net Foreign Assets (NFA) in Colombia, and discusses its implications for the real exchange rate (RER). In order to obtain the equilibrium level of NFA, we estimate a cointegrating vector with fixed-effects panel data adjusted by using Dynamic Least Squares (DOLS). From this estimated long-run level of NFA, we analyze the implications on the RER by means of the External Sustainability methodology, which allows deriving ideal levels for the current account and the RER. Our main results show that the NFA levels have been close to their long-run levelsin recent years. Furthermore, the RER has fluctuated above its ideal levels because the observed current account has been better than the normative levels implied by this estimation.

Keywords: Net Foreign Assets; Current Account Norm; Underlying Current Account; Real Exchange Rate (search for similar items in EconPapers)
JEL-codes: C33 F21 F31 F32 F41 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
https://revistas.udea.edu.co/index.php/lecturasdeeconomia/issue/view/1332 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2012:i:77:p:9-52

Ordering information: This journal article can be ordered from
Lecturas de Economía, Departamento de Economía, Calle 67, 53-108, Medellin 050010, Colombia.

Access Statistics for this article

Lecturas de Economía is currently edited by Carlos Andrés Vasco Correa

More articles in Lecturas de Economía from Universidad de Antioquia, Departamento de Economía Contact information at EDIRC.
Bibliographic data for series maintained by Carlos Andrés Vasco Correa ().