2009, “Estimation of a Time Varying Natural Interest Rate for Peru,” Working Paper 2009-009

Following the approach of Mésonnier and Renne (2007), we estimate a Natural Interest Rate (NIR) using quarterly Peruvian data for the period 1996:3-2007:2. The model has six equations and it is estimated using the Kalman \u85lter where the output gap and the NRI are treated as unobervable variables. The results indicate a relatively more stable NRI for the period 2001:3-2007:2 in comparison with the period 1996:3-2001:2. In comparison with the observed real interest rate, the NRI is more stable. The gap of the real interest rate, which measure the stance of the monetary policy, indicates a restrictive monetary policy for the periods 1996-2001 and 2003. The results suggest an expansive monetary policy for the periods 2002 and 2004-2007. Finally, we esti-mate the NRI using simple approaches as Hodrick and Prescott (1997), Baxter and King (1999), Christiano and Fitzgerald (2003). The results indicate strong di¤erences between these estimates and our results