Abstract
Since most of Colombia's exports consist of raw materials, whose prices directly determine the terms of trade, a detailed analysis of the impacts of this variable on the economy is necessary. This paper analyzes the effects of shocks in terms of exchange on production, investment, consumption, trade balance, real exchange rate and inflation in Colombia. An extensive database is used, consisting of 129 variables related to economic activity corresponding to the period 2001-2016, and a FAVAR model is estimated. The results suggest that the shocks in the terms of trade generate significant effects on the Colombian economy, since they explain approximately 5% of the variation in the country's economic activity, 8% of the investment, 6% of the trade balance and 1% of the movement in the real exchange rate.
| Translated title of the contribution | Importance of terms of trade in the Colombian economy |
|---|---|
| Original language | Spanish |
| Pages (from-to) | 125-154 |
| Number of pages | 30 |
| Journal | Cepal Review |
| Volume | 2019 |
| Issue number | 128 |
| State | Published - Aug 2019 |