Impacto de la política monetaria y la actividad económica en el mercado accionario de Colombia

The objective of this document is to identify the impact of monetary policy and the level of economic activity in the Colombian stock market. Using a VAR model and its corresponding analysis of variance decomposition and impulse response functions, we analyze the impact and interdependence between the variables involved in the system for the period between July 2001 and June 2011. The variance´s decomposition analysis, shows significant findings and sometimes disconcerting, like, are the increases in the producer price index (IPP) and the industrial production index (IPI), which explains even after five years by more than 40% the variance in the Colombian stock prices, rather, increases in the Republic Bank intervention´s interest rate (TISE) and inflation (IPC), which move the stock market´s variance in Colombia, as most think. In fact increases in the IPC never become relevant in explaining the movements of the stock market and just a year later, an increased rate of intervention by the monetary authority can explain only 11% of the share price’s movement in the stock market, over time effect is lost.