Output Gap and Neutral Interest Measures for Colombia
La serie Borradores de Economía es una publicación de la Subgerencia de Estudios Económicos del Banco de la República. Los trabajos son de carácter provisional, las opiniones y posibles errores son responsabilidad exclusiva del autor y sus contenidos no comprometen al Banco de la República ni a su Junta Directiva.
In this paper two new measures of the Colombian output gap and the real neutral interest rate are proposed. Instead of relying only on statistical filters, the proposed measures use semi-structural New-Keynesian models, adapted for a small open economy. The output gap measures presented are in line with previous works for Colombia and capture all the turning points of the Colombian business cycle, as measured by Alfonso et al. (2011). They are also strongly correlated with inflation and precede its movements along the sample. The neutral interest rate computed indicates that the monetary policy stance has been overall countercyclical, but has failed to anticipate the output gap’s movements, or at least react strongly enough to them.
A previous version of this paper was presented as a thesis to obtain a master’s degree in economics from the Pontificia Universidad Javeriana. Of course, any remaining errors are the sole responsability of the authors. The results and opinions expressed in this document do not compromise in any way the Banco de la República, its board of governors or the Inter-American Development Bank.
