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Coffee, the money market, the real exchange rate, and economic fluctuations in Colombia
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Otero, Jesús Gilberto (1998) Coffee, the money market, the real exchange rate, and economic fluctuations in Colombia. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b1363697~S1
Abstract
This thesis analyses the effects of coffee booms on the money market, the real
exchange rate, and the business cycle in Colombia. Chapter 2 presents an overview
of the coffee sector in the country, including a brief description of its macroeconomic
role, and unique institutional structure.
Chapter 3 investigates, from a simulation perspective, two empirical
difficulties that arise in econometric modelling when using quarterly data, as is done
in chapters 4 and 5. The first practical concern is whether to conduct the econometric
analysis on data that have been subjected to seasonal adjustment or in terms of
unadjusted data. The simulation results provide a justification for using seasonally
unadjusted data, as the use of filters reduces the power of the Dickey-Fuller and
Phillips-Perron cointegration tests. The second difficulty concerns an empirical
regularity encountered when analysing the Colombian quarterly series of money
supply and GDP, both of which exhibit a structural break (or change) in the seasonal
pattern. We find that these structural breaks bias both unit root and seasonal root
tests, so that new critical values must be tabulated allowing for a change in either the
level and/or the seasonal pattern of the underlying series.
Chapter 4 examines the monetary consequences of coffee booms. The
theoretical work on this subject shows that under a regime of fixed exchange rates,
export booms affect both the demand and the supply for money. Within this
theoretical framework, we assess whether the coffee booms of the second half of the
seventies and mid eighties led to excess money supply in Colombia. We find a direct
association between coffee export booms and excess money supply, implying that
external disturbances jeopardise the ability of the economic authorities to carry out
successful monetary policy.
Chapter 5 uses the Johansen procedure to estimate a real exchange rate
determination model for Colombia. We find one cointegrating vector, which can be
thought of as a long-run real exchange rate equation. The deviations of the real
exchange rate from its long-run equilibrium relationship, after correcting for the
short-run dynamics, are interpreted as a measure of real exchange rate misalignment.
The simulation performance of the model, during the period of estimation and three
years into the future, is particularly good, with the simulated real exchange rate
reproducing the general long-run behaviour of the actual series.
Chapter 6 develops an intertemporal disequilibrium model in order to analyse
the effects of temporary, anticipated, and permanent coffee price shocks on a small
open economy under Keynesian unemployment. Our results indicate that a coffee
price boom (whether temporary, anticipated or permanent) increases nontradable
output in the short and long run (a similar result is obtained when we discuss other
disequilibrium regimes). The basic model is then extended by including a
government sector that administers a coffee price stabilisation fund, and by allowing
capital market imperfections. Our results indicate that when the government is able to
borrow on more favourable terms in international capital markets than households,
the stabilisation fund neutralises part of the short-term effect of a temporary coffee
price boom. On the other hand, when the government and the private sector borrow
on the same terms, the stabilisation fund turns out to be redundant.
Item Type: | Thesis (PhD) |
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
Library of Congress Subject Headings (LCSH): | Coffee industry -- Colombia -- Mathematical models, Stock exchanges -- Colombia, Coffee industry -- Colombia -- Economic aspects |
Official Date: | August 1998 |
Institution: | University of Warwick |
Theses Department: | Department of Economics |
Thesis Type: | PhD |
Publication Status: | Unpublished |
Supervisor(s)/Advisor: | Smith, Jeremy (Jeremy P.) ; Rankin, Neil |
Sponsors: | Fundación para el - COLFUTURO ; British Council ; Banco de la República (Colombia) |
Extent: | xii, 268 leaves |
Language: | eng |
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