Using additional information in estimating output gap in Peru: a multivariate unobserved component approach
Luis-Gonzalo Llosa ()
No 243, Econometric Society 2004 Latin American Meetings from Econometric Society
One of the key inputs for inflation targeting regime is the right identification of inflationary or disinflationary pressures. These pressures are usually approximated by the output gap. In this paper we provide an estimation of the Peruvian output gap using a multivariate unobserved component (MUC) model, relying on an explicit short term relation between output gap an inflation rate (Phillips Curve) and structural restrictions over output stochastic dynamics. The estimation is carried out via Kalman Filter technique. The results show that MUC output gap estimate is less sensible to end of sample problems and exhibits more relation with the Peruvian inflation process than other estimates, calculated with the Hodrick-Prescott filter and the production function approach. Furthermore, the diagnostic statistics report that MUC estimate increases out-sample predictive power for inflation. All these features make MUC output gap more reliable than other alternatives.
Keywords: Output gap; Inflation; unobserved component model (search for similar items in EconPapers)
JEL-codes: E32 E31 C51 C52 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:243
Access Statistics for this paper
More papers in Econometric Society 2004 Latin American Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().