Exchange rate dynamics, structural breaks, and central bank interventions in Colombia

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Jorge Mario Uribe
Natalia Restrepo López


Colombia, exchange rate behavior, martingale, multiple breaks, random walk, structural breaks.


We evaluate the effectiveness of the Colombian Central Bank´s interventions in the foreign exchange market during the period 2000 to 2014. We examine the stochastic process that describes the exchange rate, with a focus on the detection of structural breaks or unit roots in the data to determine whether the Central Bank´s interventions were effective. We find that the exchange rate can be described either by a random walk or by a trend-stationary model with multiple breaks. In neither cases do we find any evidence that the exchange rate was affected by the Central Bank interventions.


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