The impact of pre-announced day-to-day interventions on the Colombian exchange rate

Echavarría, Juan José; Melo‐Velandia, Luis Fernando; Villamizar‐Villegas, Mauricio

doi:10.1007/s00181-017-1299-1

Cited by 21 publications

(32 citation statements)

References 62 publications

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“…While these results have the same expected sign as the ones found in Herrera and Ozbay (), Kamil (), Echavarría et al (), Onder and Villamizar‐Villegas (), and Villamizar‐Villegas (), the magnitude of the coefficients are, in absolute terms, significantly lower. This can also be corroborated by comparing the CLAD and Tobit coefficients presented in columns 4 and 3 of Tables and , respectively (see in particular the coefficients of the lagged dependent variable) .…”

Section: Empirical Estimationsupporting

confidence: 82%

“…ENDNOTES 1 A compilation of empirical findings can be found in Meese and Rogoff (1988), Dominguez andFrankel (1993), Edison (1993), Dominguez (2003), Neely (2005), Menkhoff (2010), and Villamizar-Villegas and Perez-Reyna (2017). 2 See Almekinders and Eijffinger (1996), Guimaraes and Karacadag (2005), Huang (2007), Jun (2008), Humala and Rodríguez (2010), Rincón and Toro (2010), and Echavarría et al (2017). 3 See Kim, Kortian, and Sheen (2000), Kamil (2008), Adler and Tovar (2014), Villamizar-Villegas (2016), and Onder and Villamizar-Villegas (2015).…”

Section: Discussionmentioning

confidence: 99%

“…See Almekinders and Eijffinger (), Guimaraes and Karacadag (), Huang (), Jun (), Humala and Rodríguez (), Rincón and Toro (), and Echavarría et al ().…”

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Foreign exchange intervention revisited: A new way of estimating censored models

Ordoñez‐Callamand

Villamizar‐Villegas

Melo‐Velandia

2018

International Finance

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In this paper, we investigate a long‐standing issue in the international finance literature: namely, how to capture the behaviour of central banks when deciding foreign exchange policies. Essentially, the main empirical problem is that a researcher observes numerous large‐scale purchases of foreign currency but a general absence of sales. This asymmetry has motivated the use of heavily dependent parametric models. We take a fresh look at this problem by allowing for a more flexible estimation, robust to various model specifications. Our results indicate that our method outperforms some of the standard models used to date. Hence, our main contribution is to provide policymakers with an improved and readily accessible toolkit to evaluate their actions. To shed some light on this, we estimate policy functions for the cases of Turkey and Colombia and highlight marked differences with the related literature.

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Section: Empirical Estimationsupporting

confidence: 82%

Section: Discussionmentioning

confidence: 99%

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Foreign exchange intervention revisited: A new way of estimating censored models

Ordoñez‐Callamand

Villamizar‐Villegas

Melo‐Velandia

2018

International Finance

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“…Similarly, Villamizar-Villegas and Perez-Reyna (2015) survey 32 studies of which: 16 show a significant effect on exchange rate levels (also small and short-lived for most), 14 show no significant impact, and 2 show mixed results. bank purchases daily, preannounced, and constant amounts of foreign currency (Echavarria et al 2013). However, to the best of my knowledge, only a handful of studies exist that directly address the issue of having multiple policy instruments, few of which estimate their dependence, and none of which center on the Colombian case.…”

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confidence: 99%

Identifying the Effects of Simultaneous Monetary Policy Shocks

Villamizar‐Villegas

2015

Contemporary Economic Policy

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Many central banks, particularly in the developing world, aim for exchange rate stability as a macroeconomic goal. However, most are reluctant to relinquish monetary policy autonomy, so they end up operating through both interest rate and foreign exchange interventions. But the use of multiple policy instruments does not necessarily equip monetary authorities with better tools to achieve their targets. On the contrary, their effects can potentially offset each other. Using daily data from the Central Bank of Colombia during the period of 1999-2012, I study the effects of simultaneous policies by first deriving new measures of monetary shocks and then determining their impact on economic activity. The main findings indicate that (a) while interest rate interventions have a significant impact on real and nominal variables, foreign exchange interventions tend to have limited effects; and (b) empirical anomalies, such as the positive relationship between output growth, inflation, and the policy rate are eliminated when properly accounting for the systematic responses of policy. (JEL E43, E52, E58, F31) But it remains a fact that compared to conventional policy the effects of unconventional monetary policy are very limited and uncertain -Olivier Blanchard 1

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“…En términos estadísticos, cuando se plantea afectar el rumbo se dirige el análisis hacia la capacidad de la autoridad monetaria para generar un "quiebre estructural" en la tendencia del tipo de cambio nominal, mientras que el segundo caso corresponde a un análisis de su capacidad para influir sobre la varianza no condicional de la serie. Para este segundo caso, los estudios hechos por el banco central en Colombia buscan determinar el grado de injerencia sobre la varianza condicional del tipo de cambio (véase, por ejemplo, el citado estudio de Echavarría, Vásquez y Villamizar, 2010;Echavarría et al, 2013a); Toro y Julio, 2005;Echavarría, Melo Velandia y Villamizar, 2013b, al interior del Banco Central;o Montenegro, 2010;Kamil, 2008, por fuera del mismo).…”

Section: Modelación De La Volatilidad Y Efectividad De Las Intervenciunclassified

Regímenes de volatilidad del tipo de cambio en Colombia e intervenciones de política

Uribe¹,

Restrepo²,

Fernández³

2015

Investigación Económica

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ResumenEn este documento se explora la evolución reciente de la volatilidad del tipo de cambio nominal (peso-dólar) en Colombia. Se identifican algunas de las características del proceso que la describe, separando la evolución de la volatilidad condicional y la volatilidad no condicional, a la cual se le permite transitar entre regímenes, utilizando un modelo ARCH con cambios de régimen (SWARCH). Al comparar los regímenes de volatilidad, se concluye que las intervenciones del Banco de la República en el mercado cambiario no han sido efectivas para inducir un cambio de régimen en la volatilidad de la serie. Palabras clave: política cambiaria Colombia, SWARCH, intervenciones, volatilidad tipo de cambio países emergentes. Clasificación JEL: C58, E42, E58, E61. AbstractIn this document, we explore the dynamics of the volatility of the Colombian exchange rate (USA dollar-Colombia peso). Some features of the stochastic process describing the exchange rate volatility are identified. Special attention is given to the distinction between conditional and unconditional moments. We use an ARCH model with regimen switching (SWARCH) to perform this task. From the comparison of the volatility regimes we conclude that the interventions of the Colombia Central Bank have been ineffective to induce a regimen change in the market. . Los autores agradecen el apoyo de la Universidad del Valle y del Centro de Investigaciones y Documentación Socioeconómica (CIDSE) en tiempo y recursos, así como la excelente asistencia de investigación de Karol Carbonell y las discusiones con los integrantes del grupo de Macroeconomía Aplicada y Economía Financiera (MAEF) de su institución de adscripción, en especial los comentarios de Inés María Ulloa. Además, agradecen los comentarios realizados por los pares académicos anónimos de la revista. Las opiniones expresadas en este documento son responsabilidad de los autores, así como los errores u omisiones que se pudieren presentar.

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The impact of pre-announced day-to-day interventions on the Colombian exchange rate

Cited by 21 publications

References 62 publications

Foreign exchange intervention revisited: A new way of estimating censored models

Foreign exchange intervention revisited: A new way of estimating censored models

Identifying the Effects of Simultaneous Monetary Policy Shocks

Regímenes de volatilidad del tipo de cambio en Colombia e intervenciones de política

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