Modelling Official and Parallel Exchange Rates in Colombia under Alternative Regimes: A Non Linear Approach

Serie

  • Borradores de investigación

Resumen

  • 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.

fecha de publicación

  • 2000-02

Líneas de investigación

  • Cointegration
  • Colombia
  • Non Linear Error Correction Models
  • Parallel Market

Issue

  • 3231