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Modelling official and parallel exchange rates in Colombia under alternative regimes: a non-linear approach

Costas Milas and Jesus Otero

No 3231, Borradores de Investigación from Universidad del Rosario

Abstract: We examine the long-run relationship between the parallel and the official exchange rate in Colombia over two regimes; a crawling peg period and a more flexible crawling band one. The short-run adjustment process of the parallel rate is examined both in a linear and a non-linear context. We find that the change from the crawling peg to the crawling band regime did not affect the long-run relationship between the official and parallel exchange rates, but altered the short-run dynamics. Non-linear adjustment seems appropriate for the first period, mainly due to strict foreign controls that cause distortions in the transition back to equilibrium once disequilibrium occurs.

Keywords: Parallel market; cointegration; non-linear error correction models; Colombia (search for similar items in EconPapers)
JEL-codes: C32 F31 O54 (search for similar items in EconPapers)
Pages: 22
Date: 2000-02-01
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Citations: View citations in EconPapers (1)

Downloads: (external link)
http://repository.urosario.edu.co/bitstream/handle/10336/11301/3231.pdf

Related works:
Journal Article: Modelling official and parallel exchange rates in Colombia under alternative regimes: a non-linear approach (2003) Downloads
Working Paper: Modelling Official And Parallel Exchange Rates In Colombia Under Alternative Regimes: A Non-Linear Approach (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000091:003231

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