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Estimation of a Time Varying Natural Interest Rate for Peru

Listed author(s):
  • Humala, Alberto

    (Central Reserve Bank of Peru)

  • Rodríguez, Gabriel

    ()

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

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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File URL: http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2009/Working-Paper-09-2009.pdf
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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
Handle: RePEc:rbp:wpaper:2009-009
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