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Output Gap and Neutral Interest Measures of Colombia

Author

Listed:
  • Andrés González

    (Universidad de los Andes)

  • Segio Ocampo
  • Julián Pérez

    (Banco de la República, Colombia)

  • Diego Rodríguez

    (Banco de la República, Colombia)

Abstract

Three new measures of the Colombian output gap and the real neutral interest rate are proposed. Instead of relying only on statistical filters, the proposed measures use semi-structural New Keynesian models, adapted for a small open economy. The output gap measures presented are in line with previous works for Colombia and capture all the turning points of the Colombian business cycle, as measured by Alfonso et al., 2011. They are also strongly correlated with inflation and precede its movements along the sample. The neutral interest rate computed indicates that the monetary policy stance has been overall countercyclical, but has failed to anticipate the output gap’s movements, or at least react strongly enough to them.

Suggested Citation

  • Andrés González & Segio Ocampo & Julián Pérez & Diego Rodríguez, 2013. "Output Gap and Neutral Interest Measures of Colombia," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(2), pages 231-286, July-Dece.
  • Handle: RePEc:cml:moneta:v:i:y:2013:i:2:p:231-286
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    References listed on IDEAS

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    Cited by:

    1. Juan José Echavarría & Andrés González, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, December.
    2. Neville Francis & Sergio Restrepo-Angel, 2018. "Sectoral and aggregate response to oil price shocks in the Colombian economy: SVAR and Local Projections approach," Borradores de Economia 1055, Banco de la Republica de Colombia.
    3. Paulo M. Sánchez & Luis Fernando Melo, 2013. "Combinación de brechas del producto colombiano," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 31(72), pages 74-82, December.
    4. Julio A. Carrillo & Rocio Elizondo & Cid Alonso Rodríguez-Pérez & Jessica Roldán-Peña, 2018. "What Determines the Neutral Rate of Interest in an Emerging Economy?," Working Papers 2018-22, Banco de México.
    5. Amador-Torres, J. Sebastián, 2017. "Finance-neutral potential output: An evaluation in an emerging market monetary policy context," Economic Systems, Elsevier, vol. 41(3), pages 389-407.
    6. 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 2012/243, International Monetary Fund.

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    More about this item

    Keywords

    output gap; New Keynesian model; neutral interest rate;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • 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

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