The Central Bank of Colombia published a draft paper in its Borradores de EconomÃa series analysing Colombian household consumption over 2003 to 2022 using nonlinear cointegration techniques. The study finds pronounced long-run asymmetries, with consumption responding more strongly to increases in current income and to interest rate cuts than to equivalent declines or rate rises, which the authors link to the presence of liquidity constraints. Consumption is proxied by monthly retail trade indices excluding fuels and vehicles from DANE, and the analysis includes current income (Indicator of Economic Situation, ISE), interest rates, consumer credit, remittances, the consumer confidence index and demographic ageing indicators. Estimated long-run propensities to consume are about 25% higher for income increases than for income falls, while interest rate reductions induce long-run responses almost 188% larger than increases; remittances and consumer credit also support consumption in the long run, and consumer confidence and age composition are significant in the short run. The central bank notes the paper is provisional and does not represent the views of the institution or its Board.
Central Bank of Colombia 2026-02-24
Central Bank of Colombia publishes draft paper on household consumption showing 25% stronger response to income gains and 188% stronger response to interest rate cuts
The Central Bank of Colombia released a draft paper analyzing household consumption from 2003 to 2022, revealing significant long-run asymmetries in response to income changes and interest rate adjustments. Consumption reacts more strongly to income increases and interest rate cuts, with remittances and consumer credit also supporting long-term consumption. The paper is provisional and does not reflect the views of the central bank or its Board.