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

Costas Milas, Jesús Otero

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)165-179
Number of pages15
JournalEconomic Modelling
Volume20
Issue number1
DOIs
StatePublished - Jan 2003

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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