Effects of Stock Indices of Developed and Emerging Markets on Economic Activity in Colombia: a FAVAR Approach

Stephania Mosquera-López, Natalia Restrepo () and Jorge Uribe
Additional contact information
Natalia Restrepo: Universidad del Valle

Lecturas de Economía, 2016, issue 85, 155-178

Abstract: We analyze the effect of global financial conditions of developed and emerging economies on economic activity in Colombia. To accomplish this task, we estimate financial conditions indices for the stock markets of developed and emerging countries using principal components analysis. Then, we include the estimated indices as regressors in a traditional vector autoregression (VAR) that includes series of economic activity in Colombia; that is, we carry out a factor-augmented vector autoregression (FAVAR) analysis with one unobservable factor and one observable variable accounting for real economic activity to evaluate the influence of international financial conditions on macroeconomic variables in Colombia. Using monthly data, we find that the stock market conditions of emerging economies have a positive effect on macroeconomic performance in Colombia.

Keywords: stock prices; financial conditions indices; factor-augmented vector autoregression; dynamic factor models (search for similar items in EconPapers)
JEL-codes: C38 E44 G10 G15 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://aprendeenlinea.udea.edu.co/revistas/index.p ... view/323678/20780878 (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:2016:i:85:p:155-178

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

DOI: 10.17533/udea.le.n85a05

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 ().