## External Linkages and Economic Growth in Colombia: Insights from A Bayesian VAR Model

_IMF Working Papers, February 1, 2008_

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**Canonical URL:** [External Linkages and Economic Growth in Colombia: Insights from A Bayesian VAR Model](https://www.imf.org/en/publications/wp/issues/2016/12/31/external-linkages-and-economic-growth-in-colombia-insights-from-a-bayesian-var-model-21714)

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## Bibliographic details
- Authors: Pär Österholm, Lisandro Abrego
- Published: February 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869088.001

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### Summary
- Investigates the sensitivity of Colombian GDP growth to the surrounding macroeconomic environment.
- Estimates a Bayesian VAR model with informative steady-state priors for the Colombian economy using quarterly data from 1995 to 2007.
- A variance decomposition shows that world GDP growth and government spending are the most important factors, explaining roughly 17 and 16 percent of the variance in Colombian GDP growth respectively.
- The model is shown to forecast well out-of-sample and can be used to analyze alternative scenarios.
- Generating both endogenous and conditional forecasts, the paper shows that the impact on Colombian GDP growth of a substantial downturn in world GDP growth would be non-negligible but still a mild decline by historical standards.

### Methods and Data
- Model: Bayesian VAR model with informative steady-state priors.
- Data frequency and sample: Quarterly data from 1995 to 2007.
- Model evaluation: Out-of-sample forecasting performance is reported (model "shown to forecast well out-of-sample").
- Analysis tools: Variance decomposition; endogenous and conditional forecast scenarios.

### Key Findings and Statistics
- World GDP growth explains roughly 17 percent of the variance in Colombian GDP growth.
- Government spending explains roughly 16 percent of the variance in Colombian GDP growth.
- The projected impact of a substantial downturn in world GDP growth on Colombian GDP growth: described as non-negligible but a mild decline relative to historical standards.

### Scenarios and Forecasts
- The model generates both:
  - Endogenous forecasts.
  - Conditional forecasts.
- These forecasts are used to analyze alternative scenarios, including a substantial downturn in world GDP growth and its effects on Colombian GDP growth.

### Subject Areas and Keywords
- Subject: Expenditure, Fiscal policy, Foreign direct investment, Vector autoregression, Yield curve
- Keywords: GDP, GDP growth, monetary policy, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/external-linkages-and-economic-growth-in-colombia-insights-from-a-bayesian-var-model-21714_