External Linkages and Economic Growth in Colombia : Insights from a Bayesian VAR Model

• This paper investigates the sensitivity of Colombian GDP growth to the surrounding macroeconomic environment. We estimate a Bayesian VAR model with informative steady-state priors for the Colombian economy using quarterly data from 1995 to 2007. A variance decomposition shows that world GDP growth and government spending are the most important factors, explaining roughly 17 and 16 per cent of the variance in Colombian GDP growth respectively. The model, which is shown to forecast well out-of-sample, can also be used to analyse alternative scenarios. Generating both endogenous and conditional forecasts, we show that the impact on Colombian GDP growth of a substantial downturn in world GDP growth would be non-negligible but that the decline still would be mild by historical standards.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Economics

Nationalekonomi

Publication and Content Type

ref (subject category)

art (subject category)