Uncovering the Portfolio Balance Channel with the use of Sovereign Credit Ratings

Número: 
941
Publicado: 
Clasificación JEL: 
C58, E44, G11, G14
Palabras clave: 
Portfolio Balance Channel, Sovereign Credit Rating, Uncovered Interest Rate Parity, Monetary Trilemma

In this paper we study exchange rate effects due to shifts in the portfolio composition of the Colombian financial sector during 2003-2014. We first provide a theoretical understanding of the channel's transmission mechanism by modeling how the banking