WP 2005-04: Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach
WP 2005-04: Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach
WP 2005-04: Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach
N°
WP 2005-04
Title
Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach
Original title
Usando información adicional en la estimación de la brecha producto en el Perú: una aproximación multivariada de componentes no observados
Author(s)
Gonzalo Llosa and Shirley Miller
Language
Spanish
Date
2005/02/28
Abstract
One of the key elements for inflation targeting regime is the right identification of inflationary or disinflationary pressures through 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 run relation between the output gap and inflation rate (Phillips Curve) and structural restrictions over output dynamics. The results show that the MUC output gap estimate is less sensible to end of sample problems and exhibits closer dynamics with the inflation process than the standard output gap estimates.