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Estimation of a Time Varying Natural Interest Rate for Peru

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  • Humala, Alberto

    (Central Reserve Bank of Peru)

  • Rodríguez, Gabriel

    ()
    (Central Reserve Bank of Peru and Pontificia Universidad Católica del Perú)

Abstract

Following the approach of Mésonnier 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 filter 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 (difference between real and natural rates), which measures monetary policy stance, indicates a restrictive policy for 1996-2001 and for 2003. Results also suggest a real interest rate greater than NRI for 2002 and for 2004-2008.

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Bibliographic Info

Paper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2009-009.

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Date of creation: Mar 2009
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Handle: RePEc:rbp:wpaper:2009-009

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Keywords: Interest rate; natural interest rate; Kalman filter; output gap; unobservable components;

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Cited by:
  1. 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 41th Brazilian Economics Meeting] 051, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Nicolas E. Magud & 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 12/243, International Monetary Fund.
  3. 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.

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