Exchange Rate Policy and Inflation Targeting in Colombia

This paper examines Colombia`s experience with an inflation-targeting monetary policy following the abandonment of exchange rate bands in 1999, and two episodes in 2003 and 2004 that deviated from this general behavior. In these episodes, the Central Bank intervened in the forex market on a relatively large scale in order to affect the trend of the exchange rate (managed floating). These episodes are examined to draw lessons and highlight the main challenges facing monetary and forex policy. The rationale for central bank intervention in the forex market in Colombia is then critically discussed. Finally, the paper presents several issues that appear in the debate on Colombian monetary and forex policy and provides an idea of the political context in which monetary policy decisions are made

Why Reform Fails : The ‘Politics of Policies’ in Costa Rican Telecommunications Liberalization

As the \u27Washington Consensus\u27 reforms are losing momentum in Latin America, the Inter- American Development Bank (IDB) is calling for shifting the focus from the content of policy choices to the political process of their implementation. As this paper studies the paradigmatic case of telecommunications reform in Costa Rica it underscores the importance of these \u27politics of policies\u27. The analysis finds, however, that the failure of repeated liberalization initiatives was not only due to policy-makers\u27 errors in steering the project through \u27the messy world of politics\u27 (IDB); instead, as liberalization remained unpopular, policy content indeed mattered, and only the interaction of both explains the outcome. Particular attention is drawn to the political feed-back effects, as the failed reform, precisely because it had been backed by bi-partisan support, became a catalyst for the disintegration of the country\u27s long-standing two-party system.In dem Maße, in dem die mit dem „Washington Consensus“ verbundenen Reformen in Lateinamerika ins Stocken geraten sind, plädiert die Inter-American Development Bank (IDB) für eine stärkere Berücksichtigung nicht nur der Politikinhalte (policies), sondern auch des politischen Prozesses von deren Umsetzung (politics). Die vorliegende Untersuchung zum paradigmatischen Fall der Reform des Telekommunikationssektors in Costa Rica unterstreicht die Bedeutung dieser „politics of policies“. Sie zeigt allerdings auch, dass Ursache für das Scheiten wiederholter Liberalisierungsinitiativen nicht nur Fehler der Politiker sind, das Vorhaben durch „die unordentliche Welt der politics“ (IDB) zu steuern. Die breite gesellschaftliche Opposition gegen den Liberalisierungskurs bleibt. Nur die Interaktion von beiden, politics und policies, erklärt Verlauf und Ergebnis der Reform. Besonderes Augenmerk widmet die Studie den politischen Rückwirkungen der gescheiterten Reform: Sie wurde, just weil sie von beiden etablierten Parteien unterstützt wurde, zum Katalysator für den Zerfall des seit Jahrzehnten etablierten Zweiparteiensystems des Landes

Productive Development Policies in Latin America and the Caribbean: The Case of Mexico

While Mexico has potential to grow rapidly, its economic growth has remained low for the past three decades. There is no consensus on the countrys development path or on how to achieve specific goals. Since the policy debate remains ideological and lacks pragmatism, productive development policies (PDPs) are often uncoordinated, redundant or even incongruent with each other. It is therefore important to understand the process whereby PDPs are designed and the institutional setting in which they are are implemented. This paper consequently examines whether PDPs respond to market failures and/or government failures. When PDPs are not designed to address specific market failures they can produce unwanted results or prove completely ineffective. When PDPs do address government failures, it is important to determine the reasons why the failure cannot be corrected in the first place and whether PDPs will be effective at addressing the problem in a second-best manner

Innovation, Research and Development Investment and Productivity in Colombian Firms

This paper attempts to establish a formal relationship between innovation and productivity using Colombian firm-level data. It is found that the production of goods and services new to the firm and to the domestic market enhances firms` sales per worker, and innovation that results in introducing new goods and services to the international market boosts both sales and Total Factor Productivity (TFP). Innovation in processes likewise improves firms` productivity and sales. Finally, innovation in marketing and management increases sales per worker and enhances TFP when investment is made in Research and Development. The paper also studies the factors behind firms` decision to invest in innovation, the intensity of such investment and the returns to investment in innovation