Back Matter
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund

Annex

A. Data Sources

article image
Multivariate Filter—Technical Details

The structure of the MVF in section C follows Blagrave and Santoro (2016) very closely. It contains two blocks of equations modeling the dynamics of GDP and oil prices. The first block is as follows

yt=YtY¯t(1)
Y¯t=Y¯t1+Gt+ɛtY¯(2)
Gt=θGSS+(1θ)Gt1+ɛtG(3)
yt=φyt1+ɛtp+ɛty(4)

Equation (1) states that the output gap yt is the log deviation of real GDP (Yt) from its potential level Y¯t. The stochastic process for output is described by equations (2)(4). The level of potential output evolves according to potential growth Gt and a level shock ɛty¯. Potential growth is also subject to shocks ɛtG that fade gradually according to the parameter θ. The output gap is affected by demand shocks ɛty and shocks to the price of oil ɛty. The block describing oil prices is as follows

pt=PtP¯t(5)
pt=(1ρ)pt1+ɛtp(6)
P¯t=(1μ)P¯t1+PSS¯+ɛtP¯(7)

Equations (5)(7) break down oil prices into changes due to cyclical and trend shocks. The oil price gap pt is the deviation of the actual oil price Pt from its trend or structural component P¯t. The price of oil is subject to temporary shocks ɛtp, which will affect the output gap, and permanent shocks ɛtP¯, which affect potential output. The model is estimated using Bayesian methods. Priors are chosen following the guidance in Blagrave and Santoro (2016) and Blagrave and others (2015). Table 1 lists the priors and posterior estimates.1

Table 1.

Priors and Posterior Estimates

article image

References

  • Aslam, A., S. Beidas-Strom, R. Bems, O. Celasun, S. Kilic Celik, and Z. Koczan, 2016, “Trading on Their Terms? Commodity Exporters in the Aftermath of the Commodity Boom,IMF Working Paper No. 16/27 (Washington: International Monetary Fund).

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Blagrave, P. and M. Santoro, 2016, “Estimating Potential Output in Chile: A Multivariate Filter for Mining and Non-Mining Sectors,IMF Working Paper No. 16/201 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cardenas, M., and S. Rozo, 2002, “Does Crime Lower Growth? Evidence from Colombia,Commission on Development and Growth, Working Paper No. 30.

    • Search Google Scholar
    • Export Citation
  • DNP, 2016, “Política Nacional de Desarrollo Productivo,CONPES.

  • Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer, 2015, “The Next Generation of the Penn World TableAmerican Economic Review, Vol. 105 (October), pp. 315082.

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Gruss, B., 2014, “After the Boom—Commodity Prices and Economic Growth in Latin America and the Caribbean,IMF Working Paper No. 14/154 (Washington: International Monetary Fund).

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Hausman, R., L. Pritchett, and D. Rodrik, 2005, “Growth Accelerations,Journal of Economic Growth, Vol. 10, Issue 4.

  • Havik, K, K. Morrow, F. Orlandi, C. Planas, R. Raciborski, W. Roger, A. Rossi, A. Thum-Thysen, and V. Vandermeulen, 2014, “The Production Function Methodology for Calculating Potential Growth Rates and Output Gaps,European Commission Economic Papers No. 535.

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2015, “World Economic Outlook: Uneven Growth: Short- and Long-Term Factors,April (Washington).

  • International Monetary Fund, 2015, “Regional Economic Outlook: Western Hemisphere. Northern Spring, Southern Chills,April (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2017a, “World Economic Outlook: Gaining Momentum?Chapter 2, April (Washington).

  • International Monetary Fund, 2017b, Colombia: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Colombia, IMF Country Report No. 17/138 (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2017c, Colombia: Selected Issues, IMF Country Report No. 17/139 (Washington).

  • International Monetary Fund, 2017d, “Fiscal Monitor: Achieving More with Less,April (Washington).

  • Karpowicz, I., 2014, “Financial Inclusion, Growth and Inequality: A Model Application to Colombia (Washington: International Monetary Fund).

  • Loayza, N., P. Fajnzylber, and C. Calderón, 2005, “Economic Growth in Latin America and the Caribbean: Stylized Facts, Explanations, and Forecasts,” (Washington: World Bank).

    • Crossref
    • Search Google Scholar
    • Export Citation
  • OECD, 2017, OECD Economic Surveys: Colombia 2017, OECD Publishing, Paris, http://dx.doi.org/10.1787/eco_surveys-col-2017-en.

  • Perry, G.E., W.F Maloney, O.S. Arias, R. Fajnzylber, A.D. Mason, and J. Saavedra-Chanduvi, 2007, “Informality: Exit and Exclusion,” (Washington: World Bank).

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Sosa, S., E. Tsounta, and H.S. Kim, 2014, “Is the Growth Momentum in Latin America Sustainable?IMF Working Paper No. 13/109 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
1

In 2003, Colombia liberalized and restructured the oil sector, modifying the contract and taxation frameworks, as well as moving the regulatory function away from the major state-owned oil company (Ecopetrol) to an independent agency (ANH).

2

Specifically, L = WorkingAgePop * LFPR * (1 — U) * HumanK_Judex.

3

Reductions in labor informality show up as improvements in TFP in the accounting framework used in this paper since there is no informality data pre-2001 to adjust labor inputs throughout the sample.

4

See 2015 Colombia Selected Issues Paper Chapter 2.

5

TFP is obtained as a residual from the log version of equation (1), using actual GDP, the capital stock adjusted by utilization, and actual employment adjusted by human capital. Potential TFP is the result of applying an HP filter (λ=6.25) to the TFP residual.

6

See Cardenas and Rozo (2002) on the link between crime and productivity in Colombia.

1

The steady state log oil price Pss is set to the sample average and G_ss to 3.70.

Potential Growth in Colombia
Author: Mr. Sergi Lanau, Mr. Jorge Roldos, and Jose Daniel Rodríguez-Delgado