Using A Forward-Looking Phillips Curve to Estimate the Output Gap in Peru

Gabriel Rodríguez

No 2009-010, Working Papers from Banco Central de Reserva del Perú

Abstract: This paper identifies the output gap using the theoretical definition of the gap within a Phillips curve. The results show that the output gap is large and persistent. Furthermore, the output gap is not correlated with the stochastic trend which is similar to the asumption used in the unobserved components model. The model is extended to include information coming from the unemployment rate. The results are very similar to those obtained without this variable indicating poor additional information in the unemployment rate to identify the output gap. Other estimations of the output gap are performed. I use the procedures of Hodrick and Prescott (1997), Baxter and King (1999), Beveridge and Nelson (1981), Morley, Nelson and Zivot (2003), the unobserved components model of Clark (1987) and a simple quadratic trend. The results show strong di¤erences between our measure of output gap and the other measures. The closer measure is the one obtained using the unobserved component model and the simple quadratic trend.

Keywords: Business Cycles; Phillips Curve; Output Gap; Inflation; Unemployment; Filters (search for similar items in EconPapers)
JEL-codes: C22 C52 E31 E32 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-mac
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Journal Article: Using A Forward-Looking Phillips Curve to Estimate the Output Gap in Peru (2010)
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