Arbeitspapier

Competitive Devaluations in Commodity-Based Economies: Colombia and the Pacific Alliance Group

This paper investigates whether there is an S-Curve in Colombia using bilateral and disaggregated quarterly data for the period 1991-2014. More precisely, the short-run effects of a depreciation on the TB are analysed in 27 industries covered by the PAG Free Trade Agreement. The S-Curve found in sectors representing 30% of total industrial production suggests that in these cases competitive devaluations have a positive effect on the TB in the short run. However, the regression analysis using both OLS and FE methods shows that sizable ones are needed to produce the desired effects on trade flows. Our findings have important policy implications: since only large competitive devaluations can restore TB equilibrium, industrial restructuring would appear to be a more sensible strategy, though this cannot be achieved in the short run and is instead a medium/long-term goal.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 5907

Classification
Wirtschaft
Trade: General
Macroeconomic Aspects of International Trade and Finance: General
Economic Development: General
Subject
devaluations
trade balance
S-Curve
PAG Free Trade Agreement

Event
Geistige Schöpfung
(who)
Caporale, Guglielmo Maria
Costamagna, Rodrigo
Rossini, Gustavo
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2016

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Caporale, Guglielmo Maria
  • Costamagna, Rodrigo
  • Rossini, Gustavo
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2016

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