Estimation of a Time Varying Natural Interest Rate for Peru

Alberto Humala and Gabriel Rodríguez

No 2009-009, Working Papers from Banco Central de Reserva 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.

Keywords: Interest rate; natural interest rate; Kalman filter; output gap; unobservable components (search for similar items in EconPapers)
JEL-codes: C32 E32 E43 E52 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: ESTIMATION OF A TIME VARYING NATURAL INTEREST RATE FOR PERU (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:rbp:wpaper:2009-009

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