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Stylized Facts of the Peruvian Economy

Author

Listed:
  • Paul Castillo

    (Central bank of Peru)

  • Carlos Montoro

    (Central bank of Peru)

  • Vicente Tuesta

    (Central bank of Peru)

Abstract
In this paper we report the main stylized facts of the business cycle for the Peruvian Economy. This study is important for the development of economic models, which are useful to evaluate the impact of different economic policies. Moreover, for those models to have empirical validity, it is necessary they reproduce the short run dynamics of the economy. Because of this, we need a clear understanding of the stylized facts of the business cycle, in particular the volatility and the co-movements of the main macroeconomic variables. Our results can be summarized as follows: First, we verify an important structural change in the Peruvian economy in the 90´s respect to the 80´s. In particular, we observe both broader trade and financial openness, more stable fiscal and monetary policies, and deeper financial markets. Second, as a consequence of this structural change and the adoption of the fully-fledge inflation targeting regime, the cyclical behavior of the main macroeconomic variables has changed in important ways. In particular, we observe during the last period (1994-2005) in comparison with the previous period (1980-1993): a reduction of almost 4 times in volatility of output and its main components, a higher correlation of the business cycle with terms of trade, a less pro-cyclical fiscal policy, and since 2002, a higher importance of the interest rates on business cycle and inflation fluctuations.

Suggested Citation

  • Paul Castillo & Carlos Montoro & Vicente Tuesta, 2006. "Stylized Facts of the Peruvian Economy," Working Papers 2006-005, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2006-005
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Ciclo Económico; Filtro Baxter y King; Perú.;
    All these keywords.

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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