Implications of risk premium shocks in a small and open economy

José Mauricio Gil-León () and Andrés Felipe Suárez-Cant ()
Additional contact information
José Mauricio Gil-León: Universidad Pedagógica y Tecnológica de Colombia
Andrés Felipe Suárez-Cant: Universidad Pedagógica y Tecnológica de Colombia
Authors registered in the RePEc Author Service: José Mauricio Gil León ()

Lecturas de Economía, 2020, issue 92, 133-172

Abstract: This paper aims to identify the transmission channel of risk premium shocks in different macroeconomic variables. Therefore, a DSGE model for a small and open economy is formulated, which considers the behavior of households, investment decisions by companies, the reaction function of the central bank and the dynamics of the different external variables, such such as the variation of the country’s net foreign assets and foreign trade. The model is calibrated with data from the Colombian economy of the 2005-2017 period. In the simulation results, the persistence of the risk premium shock in the endogenous variables that make up the model is identified, and in particular, outstanding effects of the shock on the exchange rate, the interest rate and inflation are observed. It is concluded that the size of the elasticity of the risk premium to external indebtedness dominates the force with which the shocks affect the economy

Keywords: DSGE models; risk premium; interest rate; exchange rate. (search for similar items in EconPapers)
JEL-codes: C63 C68 E47 F37 F41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://aprendeenlinea.udea.edu.co/revistas/index.p ... /article/view/336434 (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:2020:i:92:p:133-172

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.n92a05

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 ().