Abstract

ASTRID ROMERO, Carmen. The effect of exchange rate transmission in Colombia during the years of industrialization. Ens. polit. econ. [online]. 2012, vol.30, n.spe67, pp.214-251. ISSN 0120-4483.

An intricate system of multiple exchange rates (SMER) allowed Colombia, in part, to achieve an exchange-rate based protection policy during its period of state-managed industrialization. This is confirmed by a transmission effect from the exchange rate to the prices of some imported goods as well as those for coffee, the main exporting good during the period of study. The first part of this paper studies the transmission from the exchange rate to the prices of a variety of imported products and raw materials used in manufacturing intermediate industrial goods along with some selected capital goods, using annual data from 1948 to 1974. In the second part, the transmission from the exchange rate to coffee export prices is verified using monthly data from January, 1932 to December, 1974. In the long run the transmission effect from the exchange rate to the domestic coffee prices was 0.95. The transmission of international coffee price movements into the domestic price was complete. The coffee-related economic activity, actively influenced the decision about maintaining multiple exchange rates which provided a reliable exchange tool to effectively deal with fluctuations in the international price of coffee.

Keywords : exchange rate; effect of exchange rate transmission; exchange rate policy.

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