Eduardo Sarmientoe Coyuntura Económica, Investigación Económica y Social, is a peer reviewed academic journal devoted to economic and social issues, with a particular emphasis on applied aspects and topics relevant to public policy. The articles published in this edition represent a variety of research studies that address economic and social matters in the Colombian context and in light of future challenges. They present new information and empirical evidence that enrich and contribute to both academic and social debate; moreover, they advance knowledge and highlight pressing issues to be considered in the formulation and implementation of public policies. Taken together, these works not only broaden the understanding of some of Colombia’s current challenges but also suggest practical and well grounded solutions to address these problems effectively.
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The price elasticity of supply in the housing market is crucial when determining the effect of an aggregate demand shock, such as a monetary policy shock, on the variation in housing prices. Studies of this type have been conducted mainly for advanced economies, but for emerging economies, like Colombia, such studies are scarce. In this paper, we estimate this supply elasticity using city-level data from Colombia and a time-varying parameter econometric methodology for the period 2011Q2 - 2024Q4. Additionally, we estimate the effect of a monetary policy shock on housing prices depending on the level of supply elasticity. Our findings show that for all cities, supply elasticity was decreasing until before the COVID-19 pandemic, then increased during the pandemic and subsequently decreased again. For cities like Bogotá, the elasticity ranged from 4.7 to 9.9, and for cities like Armenia, it ranged from 14.8 to 22.4. Considering this heterogeneity across cities, we estimate that a unitary increase in the monetary policy surprise has a strong and lasting effect, reducing house price growth by 6 percentage points (p.p.) as the supply curve becomes more inelastic. The decreasing trend of housing elasticities over time is related to the increase in cities population, this results in a reduction in the monetary policy effectiveness.