Abstract

Using estimations by Bresser-Pereira et al. (2021), this paper analyses the
misalignment between the real exchange rate and the current account equilibrium
exchange rate in Colombia in the last two decades (2000-2020). Evidence suggests that the
commodity boom and bust cycle in this period is important to explain (i) the main trend
of the misalignment, (ii) the deterioration of the current account in recent years and (iii)
the general macroeconomic performance of the Colombian economy. A discussion about
macroeconomic development and stability is also provided in the context of the Colombian
financial configuration, characterized by a flexible exchange rate regime, central bank
independence and inflation targeting. Ideas in this paper are consistent with key elements in
the New Developmentalism Theory.

JEL Classification: E44; E61; F41.