This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Measuring the Natural Interest Rate for the Peruvian Economy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Paul Castillo () (Central bank of Peru)
Carlos Montoro () (Central bank of Peru)
Vicente Tuesta () (Central bank of Peru)

Additional information is available for the following registered author(s):

Abstract

Since the adoption of the fully-fledged inflation targeting (IT) regime by an important group of central banks, a measure of both the potential output and the natural interest rate have become one of the main concerns of the research agenda. Estimation of the natural interest rate (NIR) is crucial to capture the stance of the monetary policy. In particular, the gap between the instrument rate of the Central Bank and the NIR can be a useful guideline for the position of the monetary policy and can also help to rationalize policy decisions. In this paper we estimate the NIR for the Peruvian Economy. We do so by applying the Kalman Filter to a semi-structural small open economy model with Peruvian data during he sample 1994-2005. Overall, our findings show a persistent reduction on the Peruvian NIR since 1999, which is related to an improvement on the terms of trade and a reduction on the international interest rate. Moreover, the estimated gap shows a loose monetary impulse between 1994 and 1997, tight between 1998 and 2001, and slightly loose between 2002-2005. Finally, the variance decomposition shows that 25 percent of fluctuations in the gap are explained by fluctuations in the NIR. According to this, a time-fixed NIR would give a quite imprecise measure of monetary policy stance.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2006/Documento-Trabajo-03-2006.pdf
File Format:
File Function: Application/pdf
Download Restriction: no

Publisher Info
Paper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2006-003.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:rbp:wpaper:2006-003

Contact details of provider:
Postal: Jr. Miro Quesada 441, Lima
Phone: 427-6250 ext. 3841
Fax: 426-6125
Web page: http://www.bcrp.gob.pe
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Research Unit).

Related research
Keywords: Tasa Natural de Interés; Filtro de Kalman; Política Monetaria; Perú.;

Other versions of this item:

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lindblad, Hans & Sellin, Peter, 2003. "The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach," Working Paper Series 152, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
  2. Gonzalo Llosa & Vicente Tuesta & Marco Vega, 2005. "A BVAR Forecasting Model For Peruvian Inflation," Working Papers 2005-007, Banco Central de Reserva del Perú. [Downloadable!]
  3. Jean-Paul Lam, 2004. "Estimating Policy-Neutral Interest Rates for Canada Using a Dynamic Stochastic General-Equilibrium Framework," Working Papers 04-9, Bank of Canada. [Downloadable!]
    Other versions:
  4. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
  5. Neiss, Katharine & Nelson, Edward, 2001. "The Real Interest rate Gap as an Inflation Indicator," CEPR Discussion Papers 2848, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Jesus Crespo Cuaresma & Ernest Gnan & Doris Ritzberger-Gruenwald, 2003. "Searching for the Natural Rate of Interest: A Euro-Area Perspective," Working Papers 84, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
    Other versions:
  7. Philip Lane & Gian Maria Milesi-Ferretti, 2005. "A Global Perspective on External Positions," The Institute for International Integration Studies Discussion Paper Series iiisdp079, IIIS. [Downloadable!]
    Other versions:
  8. Michal Brzoza-Brzezina, 2004. "The Information Content of the Natural Rate of Interest: The Case of Poland," Macroeconomics 0402007, EconWPA. [Downloadable!]
  9. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October. [Downloadable!] (restricted)
    Other versions:
  10. Athanasios Orphanides & John C. Williams, 2002. "Robust monetary policy rules with unknown natural rates," Working Papers in Applied Economic Theory 2003-01, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  11. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  12. Staiger, Douglas & Stock, James H & Watson, Mark W, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter. [Downloadable!] (restricted)
  13. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Review, American Economic Association, vol. 91(2), pages 248-252, May. [Downloadable!] (restricted)
  14. Armas, Adrián & Grippa, Francisco & Quispe, Zenón & Valdivia, Luis, 2001. "De metas monetarias a metas de inflación en una economía con dolarización parcial: El caso peruano," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 7. [Downloadable!]
  15. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February. [Downloadable!] (restricted)
    Other versions:
  16. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Blackwell Publishing, vol. 72(3), pages 707-734, 07. [Downloadable!] (restricted)
    Other versions:
  17. Thomas Laubach & John C. Williams, 2003. "Measuring the Natural Rate of Interest," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1063-1070, November. [Downloadable!] (restricted)
    Other versions:
  18. Clark, Todd E. & Kozicki, Sharon, 2004. "Estimating equilibrium real interest rates in real-time," Discussion Paper Series 1: Economic Studies 2004,32, Deutsche Bundesbank, Research Centre. [Downloadable!]
    Other versions:
  19. Antulio N. Bomfim, 2001. "Measuring equilibrium real interest rates: what can we learn from yields on indexed bonds?," Finance and Economics Discussion Series 2001-53, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  20. Jesus Crespo-Cuaremsa & Ernest Gnan & Doris Ritzberger-Gruenwald, 2003. "Searching for the natural rate of interest: a euro area perspective," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 60-80 Bank for International Settlements. [Downloadable!]
  21. repec:tcd:wpaper:tep16 is not listed on IDEAS
Full references

Statistics
Access and download statistics

Did you know? About 2500 working paper series are listed on RePEc.

This page was last updated on 2009-10-18.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.