Output Fluctuations and Monetary Shocks: Evidence From Colombia

March 1, 1991

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Vincent Reinhart, and Carmen Reinhart. Output Fluctuations and Monetary Shocks: Evidence From Colombia, (USA: International Monetary Fund, 1991) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using annual data for Colombia over the last thirty years and a new battery of econometric techniques, we test opposing theories that explain macroeconomic fluctuations: The neoclassical synthesis, which posits that, in the presence of temporary price rigidity, an unanticipated monetary expansion produces output gains that erode over time with increases in the price level; and an alternative explanation, which focuses on “real” technological or preference shocks as the sources of output changes. The coefficients from these systems are used to examine two basic propositions: the long-run neutrality of nominal quantities with respect to permanent movements in the money stock; and the short-run sensitivity of output to inflation.

Subject: Exchange rates, Foreign exchange, Inflation, Labor, Monetary base, Money, Prices, Real exchange rates, Wages

Keywords: Compound terms, Correlation matrix, Exchange rate, Exchange rates, Inflation, Interest rate, Interest rate equation, Monetary base, Monetary policy, Money stock, Policy variable, Price equation, Price level, Prices trace, Real exchange rates, Wages, World coffee price, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/035
Stock No:

WPIEA0351991
ISBN:

9781451978353
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 38, No. 4, December 1991.

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