Stylized Facts of the Peruvian Economy

Paul Castillo, Carlos Montoro and Vicente Tuesta

No 2006-005, Working Papers from Banco Central de Reserva del Perú

Abstract: In this paper we report the main stylized facts of the business cycle for the Peruvian Economy. This study is important for the development of economic models, which are useful to evaluate the impact of different economic policies. Moreover, for those models to have empirical validity, it is necessary they reproduce the short run dynamics of the economy. Because of this, we need a clear understanding of the stylized facts of the business cycle, in particular the volatility and the co-movements of the main macroeconomic variables. Our results can be summarized as follows: First, we verify an important structural change in the Peruvian economy in the 90´s respect to the 80´s. In particular, we observe both broader trade and financial openness, more stable fiscal and monetary policies, and deeper financial markets. Second, as a consequence of this structural change and the adoption of the fully-fledge inflation targeting regime, the cyclical behavior of the main macroeconomic variables has changed in important ways. In particular, we observe during the last period (1994-2005) in comparison with the previous period (1980-1993): a reduction of almost 4 times in volatility of output and its main components, a higher correlation of the business cycle with terms of trade, a less pro-cyclical fiscal policy, and since 2002, a higher importance of the interest rates on business cycle and inflation fluctuations.

Keywords: Ciclo Económico; Filtro Baxter y King; Perú. (search for similar items in EconPapers)
JEL-codes: C82 E10 E30 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-lam and nep-mac
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