Credit bubble and stagnation in Colombia, 1990-2001

This paper explores the dynamics of the credit-crunch affecting Colombia during the second half of the 1990s. Its main objectives are to present statistical evidence regarding the phenomenon in question, to ascertain rhythms deriving from it ans some working hypotheses shedding some light on determinants of Colombian credit behaviour.The study distinguishes between exogenous and endogenous factors explaining this behavior. External capital flows play a key role in the former as their size and direction highly influence internal credit conditions and economic activity. However, changes in this flows are chanelled through a domestic financial system that amplifies their negative effect on the economy, thus playing a procedural-cyclical role.