Colombia during the Financial Crisis of the late 1990s

Abstract

The crisis of 1999 was Colombia's most significant economic crisis since the civil war of 1899-1902: GDP fell by 4.2% in one year and the unemployment rate reached 16%. The trigger of the crisis was an international crisis that reduced capital inflows. Colombia was vulnerable to a reduction in capital inflows due to the high indebtedness of households, firms, and governments at the time. Such indebtedness resulted from a boom in consumption, investment, and public spending during the early and mid-1990s. There is no consensus among scholars on the role of fiscal and monetary policy in alleviating or worsening de crisis.

Note: This is a draft chapter/article. The final version will be available in Encyclopedia of Financial Crises edited by Sara Hsu, forthcoming 2023, Edward Elgar Publishing Ltd. The material cannot be used for any other purpose without further permission of the publisher, and is for private use only.

Keywords: Colombia, Banking Crisis, Financial Crisis, Mortgage Crisis

JEL Classification: G21, N16, N26