Macroeconomic Effects of Structural Fiscal Policy Changes in Colombia

Abstract

In the past decade the Colombian economic authorities undertook a series of measures that reduced the structural fiscal deficit, decreased the government currency mismatch and deepened the local fixed-rate public bond market. This paper presents some evidence suggesting that these improvements had important effects on the behavior of the macroeconomy. They seem to have permanently reduced the sovereign risk premium, increased the reaction of output to government expenditure shocks and strengthened the response of market interest rates to monetary policy shocks.

Full publication: Fiscal Policy, Public Debt and Monetary Policy in Emerging Market Economies

Keywords: Monetary policy, fiscal policy changes, public debt management, government expenditure, market interest rates, monetary policy shocks

JEL Classification: E44, E6, E62