Effects and transmission channels of the exchange rate on the sectorial production in Colombia

Authors

  • Jorge David Quintero Otero Instituto de Estudios Económicos del Caribe Universidad del Norte Barranquilla, Colombia
  • Johan Ruíz Celis Instituto de Estudios Económicos del Caribe Universidad del Norte Barranquilla, Colombia

DOI:

https://doi.org/10.32826/cude.v42i118.68

Keywords:

exchange rate, sectoral production, fully modified OLS

Abstract

This paper estimates the effect of exchange rate on production in Colombia´s economic sectors for the period 2000-2015. In order to achieve this goal, a panel data regression model is estimated using the Fully Modified Ordinary Least Square (FMOLS) approach. This technique modifies least squares to account for endogeneity and serial correlation effects that result from cointegration between variables. This research also tries to identify the demand and supply channels that are relevant in the transmission of the effects of exchange rate on sectoral production. The results show that the exchange rate has a significant and positive effect on production in Colombia with an elasticity around 0,7, and the construction and mining sectors being the most responsive to changes in the exchange rate. It was also found that the level of international trade (aggregate demand channel) is the main explanation for the sectoral differences in the impact of the exchange rate on production.

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Published

2018-11-16

Issue

Vol. 42 No. 118 (2019): Pges 1-80 (January-April 2019)

Section

Articles

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