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Estimation Of A Time Varying Natural Interest Rate For Peru

Author

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  • Alberto Humala
  • Gabriel Rodríguez

    (Departamento de Economía - Pontificia Universidad Católica del Perú)

Abstract

Following the approach of MÈsonnier and Renne (2007), we estimate a Natural Rate of Interest (NRI) using quarterly Peruvian data for the period 1996:3-2008:3. The model has six equations and it is estimated using the Kalman Ölter with output gap and NRI as unobservable variables. Estimation results indicate a more stable NRI in period 2001:3-2008:3 than in period 1996:3-2001:2 and also more stable than the observed real interest rate. Real interest rate gap (di§erence between real and natural rates), which measures monetary policy stance, indicates a restrictive policy for 1996-2001. Results also show a negative interest rate gap onwards, suggesting a less restrictive policy.

Suggested Citation

  • Alberto Humala & Gabriel Rodríguez, 2011. "Estimation Of A Time Varying Natural Interest Rate For Peru," Documentos de Trabajo / Working Papers 2011-316, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00316
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    Cited by:

    1. Lucian Croitoru, 2016. "Are We Systematically Wrong when Estimating Potential Output and the Natural Rate of Interest?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 128-151, June.
    2. Ilyas Siklar & Umit Yildiz & Sinan Cakan, 2016. "The Time - Varying Natural Rate of Interest and Its Fundamental Determinants: Time Series Evidence from Turkey," Business and Economic Research, Macrothink Institute, vol. 6(2), pages 390-400, December.
    3. Rafael Cavalcanti De Araújo & Cleomar Gomes Da Silva, 2014. "The Neutral Interest Rate And The Stance Of Monetary Policy In Brazil," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 051, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    4. Winkelried, Diego, 2013. "Modelo de Proyección Trimestral del BCRP: Actualización y novedades," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 26, pages 9-60.
    5. Mr. Nicolas E Magud & Ms. Evridiki Tsounta, 2012. "To Cut or Not to Cut? That is the (Central Bank’s) Question In Search of the Neutral Interest Rate in Latin America," IMF Working Papers 2012/243, International Monetary Fund.

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    More about this item

    Keywords

    Interest Rate / Natural Interest Rate / Kalman Filter / Output Gap / Unobserved Components.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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