A Shock of the Net External Assets and the Colombian Economic Cycle 1994-2001

During the period 1994-2001 the Colombian economy experienced on of the most intensive business cycles of the twenty century, mostly due to the depression phase. In this paper we made an assessment or a hypothetical cause of this business cycle: a positive (and transitory and unexpected) shock to the capital stock just before the booming period. Our assessment is based on a dynamic general equilibrium model of a small open economy calibrated with the Colombian data. The shock was able to impose a certain movement to the economy: first, a boom, and after, a smooth landing. So, to explain the extent of the observed recession we need to look at other causes or propagation mechanisms not incorporated in our model.

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