Purchasing power parity in the Colombian exchange rate

  • Oscar Hernán Cerquera Losada Surcolombiana University
  • Camilo Fabiam Gómez Segura Surcolombiana University
  • Cristian José Arias Barrera Corporación Autónoma Regional del Alto Magdalena

Resumen

Objetive: to determine the fulfillment of the purchasing power parity (PPP) theory in Colombia, the exchange rate with the US dollar using as a standard.

Methodology: to check if the PPP in Colombia is achieved, monthly and quarterly data was used, which ran from January 1959 to December 2015. To do this, the longterm behavior from the real exchange rate was modeled, contrasting the unit  roots presence and structural changes. In addition, a bivariate cointegration model  was used.

Results: it was found that, in the case of Colombia, the PPP theory was not  fulfilled, since the peso and the dollar are not cointegrated. Therefore, according to the unitary root methodology, the PPP hypothesis in Colombia for the period 1959- 2015 is not validated. Everything seems to indicate that the Colombian peso has little relation with the US dollar.

Conclusions: the use of general price indices, which include tradable goods between countries, multiple barriers to international trade, imperfect competition and social, economic, political and cultural differences between both countries are important aspects when explaining the unfulfillment of the PPP

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Biografía del autor

Oscar Hernán Cerquera Losada, Surcolombiana University

Master in Economics. Economist. Professor at the Surcolombiana University. Young Researcher and Innovator in Colciencias 2010-2011. Regional Observatory Researcher in the Labor Market in Huila, ORMET Huila. Iguaque research group Member

Camilo Fabiam Gómez Segura, Surcolombiana University

Master in Economics. Economist. Professor at the Surcolombiana University. Regional Observatory Researcher in the Labor Market in Huila, ORMET Huila. Iguaque research group Member.

Cristian José Arias Barrera, Corporación Autónoma Regional del Alto Magdalena

Economist. Corporación Autónoma Regional del Alto Magdalena Economic analyst. Economist Researcher from the Iguage research group

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Publicado
2018-06-25
Cómo citar
Cerquera Losada, O., Gómez Segura, C., & Arias Barrera, C. (2018). Purchasing power parity in the Colombian exchange rate. ÁNFORA, 25(45), 123-143. https://doi.org/https://doi.org/10.30854/anf.v25.n45.2018.515
Sección
Artículos