Three essays on the relationship between financial regime, trade regime and the industrial sector in Colombia

Industrialization has been a major concern in the development process of many countries. For this purpose, the governments of developing countries have attempted to pursue different trade and financial regimes that encourage faster industrial growth. Recently many governments, notably in Latin America, have opted for trade liberalization as an instrument to promote competition, which will lead to higher economic efficiency. Reforms in the capital market have also played an important role in creating funds to finance the expansion of the industrial sector.This study analyzes the links between industrial growth, the trade regime and the financial sector. The first part contains a historical and institutional view of the development of the banking system in Colombia, its relation with the stock market and its influence on industrial growth.The second part uses panel data techniques to estimate the effects of trade liberalization on industrial total factor productivity at the sectoral level. After correcting the index of total factor productivity for market imperfections, returns to scale and capacity utilization, productivity growth was found to be influenced by the development of financial and capital markets.The third part of the dissertation studies the behavior of the stock market and its relation with macroeconomic variables, in particular industrial production. Using new econometric techniques (i.e. ARCH models), this paper tries to explain and forecast volatility and returns in the stock market. Given this information it is possible to build models to forecast the future behavior of the stock market and the risk faced by investors. It also tests for the rationality of the Colombian market and it finds that this hypothesis can not be accepted and traditional real variables do not explain changes in prices.U of I OnlyETDs are only available to UIUC Users without author permissio