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Output gap and Neutral interest measures for Colombia

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  • Andrés González

    ()

  • Sergio Ocampo

    ()

  • Julián Pérez

    ()

  • Diego Rodríguez

    ()

Abstract

In this paper two 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 & Sergio Ocampo & Julián Pérez & Diego Rodríguez, 2012. "Output gap and Neutral interest measures for Colombia," BORRADORES DE ECONOMIA 009870, BANCO DE LA REPÚBLICA.
    • Handle: RePEc:col:000094:009870
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    References listed on IDEAS

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    1. Eliana González & Luis F. Melo & Luis E. Rojas & Brayan Rojas, 2011. "Estimations of the Natural Rate of Interest in Colombia," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 33-75, January-J.
    2. Viviana Alejandra Alfonso & Luis Eduardo Arango & Fernando Arias & José David Pulido, 2011. "Ciclos de negocios en Colombia: 1980-2010," Borradores de Economia 651, Banco de la Republica de Colombia.
    3. Mesonnier, Jean-Stephane & Renne, Jean-Paul, 2007. "A time-varying "natural" rate of interest for the euro area," European Economic Review, Elsevier, vol. 51(7), pages 1768-1784, October.
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    7. Juan José Echavarría Soto & Enrique López Enciso & Martha Misas Arango & Juana Téllez Corredor & Juan Carlos Parra Álvarez, 2008. "La tasa de interés natural en Colombia," Investigación Conjunta-Joint Research,in: Centro de Estudios Monetarios Latinoamericanos (CEMLA) (ed.), Estimación y Uso de Variables no Observables en la Región, edition 1, volume 1, chapter 7, pages 164-201 Centro de Estudios Monetarios Latinoamericanos, CEMLA.
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    Citations

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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 Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, Diciembre.
    2. Paulo M. Sánchez & Luis Fernando Melo, 2013. "Combinación de brechas del producto colombiano," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 31(72), pages 74-82, December.
    3. repec:eee:ecosys:v:41:y:2017:i:3:p:389-407 is not listed on IDEAS
    4. Paulo M. Sánchez & Luis Fernando Melo, 2013. "Combinación de brechas del producto colombiano," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 31(72), pages 74-82, December.
    5. 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.
    6. 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.

    More about this item

    Keywords

    Output Gap; New-keynesian model; Neutral interest rate.;

    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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