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Item type:Publication, Evolution of monetary policy in Peru: an empirical application using a mixture innovation TVP-VAR-SV model(Oxford University Press, 2021-12-15)This article discusses the evolution of monetary policy (MP) in Peru in 1996Q1–2019Q4 using a mixture innovation time-varying parameter vector autoregressive (VAR) model with stochastic volatility (TVP-VAR-SV) as proposed by Koop, Leon-Gonzales and Strachan. The main empirical results are: (i) the VAR coefficients and volatilities change more gradually than the contemporaneous coefficients over time; (ii) the volatility of MP shocks was higher under the pre-Inflation Targeting (IT) regime; (iii) a surprise increase in the interest rate produces gross domestic product (GDP) growth falls and reduces inflation in the long run; (iv) the interest rate reacts more quickly to aggregate supply shocks than to aggregate demand shocks; (v) MP shocks explain a high percentage of domestic variables behavior under the pre-IT regime but their contribution decreases under the IT regime. Overall, these results show that MP has contributed in Peru to lower macroeconomic volatility by (i) reducing average long-term inflation, (ii) increasing the response of GDP growth rate to interest rate, and (iii) by becoming more predictable. (JEL codes: C11, C32, and E52).2 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Time changing effects of external shocks on macroeconomic fluctuations in Peru: empirical application using regime-switching VAR models with stochastic volatility(Springer Science+Business Media, 2022-08-24)This article quantifies and analyzes the evolving impact of external shocks on Peru’s macroeconomic fluctuations in 1994Q1–2019Q4. For this purpose, we use a group of models with regime-switching time-varying parameters and stochastic volatility (RS-VAR-SV), as proposed by Chan and Eisenstat (J Appl Econ 33(4):509–532, 2018. https://doi.org/10.1002/jae.2617). The data suggest a model with contemporaneous coefficients and constant lags and intercepts, but with regime-switching variances; and point to the existence of two regimes. The IRFs, FEVDs, and HDs show that: (i) China growth shocks have a higher impact on Peru’s output growth (around 0.8%); (ii) financial shocks contract domestic output growth by 0.3% and domestic monetary policy is synchronized with Fed rate movements; (iii) external shocks explain 35% and 70% of output fluctuations under regimes 1 and 2, respectively; and (iv) China growth shocks contributed 1.0 p.p. to the 1.1-p.p. increase (around 89%) in Peru’s output growth between regimes 1 and 2. Additionally, we validate these results by performing seven robustness exercises consisting in changing priors, reordering variables, changing variables, and using four different specifications for the baseline model. - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Evolution of the effects of mineral commodity prices on fiscal fluctuations: Empirical evidence from TVP-VAR-SV models for Peru(Springer Science+Business Media, 2022-04-02)This paper studies the evolution of the effects of fluctuations in mineral commodity prices on fiscal variables, especially those associated with fiscal revenues, in Peru by means of VAR models with time-varying parameters and stochastic volatility (TVP-VAR-SV). We compare different alternative specifications using the marginal likelihood and the deviance information criterion, which show that it is essential to consider stochastic volatility. It is found that an increase of 1% in the growth of mineral commodity prices generates increases of around 1.5 and 2.5% in the growth of taxes from mining and mining canon, respectively, thus reflecting a remarkable sensitivity of these variables to external shocks. In turn, these responses are increasingly more pronounced until reaching a peak around 2009 and then decrease, which is in line with the dynamics of the commodities boom. In the variance decomposition, the importance of shocks in mineral commodity prices in explaining fluctuations in taxes from mining and mining canon increases in line with the increasing tendency of mineral prices until the Great Recession, where shocks in mineral commodity prices explain between 40 and 50% of fluctuations in taxes from mining and mining canon, and then it is reduced. This shows the importance of allowing time-varying parameters and stochastic volatility in contrast with a standard VAR.4 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Evolution of the exchange rate pass-through into prices in Peru: An empirical application using TVP-VAR-SV models(Elsevier Ltd, 2024-04-01)This study examines the evolution of exchange rate pass-through (ERPT) into import, producer, and consumer prices in Peru from 1995Q2 to 2022Q4 using time-varying parameter and stochastic volatility VAR models. Findings reveal a resurgence of ERPTs into import and producer prices since 2009, particularly during the period of a strong US dollar following the 2013 taper tantrum and from 2020 to 2022. Increased uncertainty surrounding the exchange rate and future macroeconomic policies, triggered by the political uncertainty following the 2021 general elections, may have contributed to this trend. Short-term ERPT exceeds long-term ERPT, which might reflect prevalent price dollarization in Peru's import and producer prices. Consumer ERPT remained stable at around 10% until 2009, then increased to 15%, indicating lower levels of price dollarization. This paper sheds light on ERPT dynamics in Peru, carrying implications for policymakers in emerging economies.1 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Impact of informal trade on labor employability in the Peruvian Amazon economy(Sapienza Grupo Editorial, 2024-04-01)Informal trade plays a vital role in the economy by providing employment opportunities to those seeking to meet their basic needs. Therefore, the objective was to assess the impact of informal trade on labor employability in the Peruvian Amazon. A descriptive cross-sectional study was conducted with a sample of 421 street vendors from streets, avenues, and market surroundings. Data collection was carried out through a survey, whose metrics were determined by content validity and reliability processes. The results indicate that most participants were between 31 and 40 years old, predominantly women, had secondary education, and were Peruvian nationals. Regarding informal trade, most were self-employed and earned daily incomes ranging from 100 to 500 new soles. Street vending was predominant, with snacks and meals being notable products sold. Finally, it was concluded that informal trade in Madre de Dios generates 1,636 direct jobs, representing 2.1% of the population. The majority are women aged 31-40 with secondary education, earning between 100 and 1,000 soles, and working between 8 to 10 hours daily. The findings highlight the need for targeted policies to support informal traders, particularly women, and enhance economic resilience.4 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Time-Varying Effects of Climate Change Shocks on Macroeconomic Fluctuations in Peru(Pontificia Universidad Católica del Perú. Departamento de Economía, 2026-08)This paper uses the time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV) of Chan and Eisenstat (2018) to quantify the effects of two climate change (CC) shocks on macroeconomic fluctuations in Peru, assess their relative importance, and trace their evolution over time. The two shocks are the El Ni˜no phenomenon (ENP) and deviations of average temperature from its historical mean. Bayesian model selection criteria indicate that the best-fitting models allow only some parameters to vary over time, while the inclusion of the stochastic volatility (SV) component is essential for model performance. The results yield three main findings. First, both CC shocks operate as negative supply shocks: they reduce gross domestic product (GDP), increase inflation, and raise the interest rate. They also explain GDP and inflation dynamics better than interest-rate dynamics. GDP falls by 0.8 (0.05-0.20) pp in response to the ENP (average temperature deviation) shock, while inflation rises by 0.25 pp in response to both shocks. By sector, primary GDP falls by 1.5 pp in response to ENP shock, with a 5.0 (0.8–1.0) pp drop in fishing (agriculture) GDPs. In response to temperature deviations shock, primary GDP falls by 1.2–1.4 pp, fishing (agriculture) GDP by 2.0 (1.2–1.5) pp. Second, the effects of both shocks are time-varying and more damaging for the primary sector. ENP has larger and more significant effects on GDP in 1998Q2 and 2017Q2, and on inflation in 2017Q2. Average temperature deviations have larger and more significant effects on GDP in 1994Q3 and 2005Q1, and on inflation in 1994Q3 and 2019Q1. Third, the ENP shock is more important and statistically significant than the average temperature deviation shock in explaining macroeconomic performance. ENP also helps explain the sharp GDP contractions and inflation increases observed in 1998 and 2017.1 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Time-Varying Impact of Fiscal Shocks over GDP Growth in Peru: An Empirical Application Using Hybrid TVP-VAR-SV Models(Elsevier B.V., 2023-03-01)This paper estimates hybrid TVP-VAR-SV models suggested by Chan and Eisenstat (2018a) to identify and quantify the impact of fiscal shocks on GDP growth in Peru between 1995Q1–2018Q2. According to Bayesian criteria, the best models exhibit time-varying dynamics, but not necessarily in all parameters. Considering this result, our findings suggest that: (i) fiscal shocks are significant in the whole sample according to impulse response functions, forecast error variance decomposition and historical decomposition of GDP growth; (ii) tax revenue shocks are the least important and their impact is model dependent; (iii) expenditure shocks are relevant drivers of GDP growth; and (iv) expenditure multipliers, mainly for capital spending, have been growing over the last 20 years. We recommend constant revision of estimated fiscal multipliers and suggest that, in following years, fiscal policy in Peru should be mostly driven by capital expenditure.1 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Time-Varying Effects of External Shocks on Macroeconomic Fluctuations in Peru: An Empirical Application Using TVP-VAR-SV Models(Springer Science+Business Media, 2023-11-24)This study uses a family of VAR models with time-varying parameters and stochastic volatility (TVP-VAR-SV) to analyze the impact of external shocks on output growth and inflation in Peru in 1992Q1-2017Q1. The statistical relevance of the models is assess...1 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Does the Central Bank of Peru Respond to Exchange Rate Movements? A Bayesian Estimation of a New Keynesian DSGE Model with FX Interventions(Elsevier Inc., 2023-09-01)This paper assesses the role played by the exchange rate and FX intervention in setting monetary policy interest rates in Peru. We estimate a Taylor rule that includes inflation, output gap and the exchange rate using a New Keynesian DSGE model that follows closely Schmitt-Grohé and Uribe (2017). The model is extended to include an explicit sterilized FX intervention rule as in Faltermeier, Lama, and Medina (2017). The main empirical results show that the model that features a Taylor rule which does not respond to changes in the nominal exchange rate and considers an active use of FX interventions by the Central Bank of Peru clearly outperforms other model specifications in terms of the marginal log density. We also find that the coefficient associated with the response of the Taylor rule to inflation is close to 2 and the one associated with the output gap is greater than 1. Additionally, we find that FX interventions have become more responsive to exchange rate fluctuations during the IT period. Finally, the estimated IRFs show that FX interventions has contributed to reducing the volatility of GDP in response to productivity and terms of trade shocks in Peru.3 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Time-varying effects of financial uncertainty shocks on macroeconomic fluctuations in Peru(Elsevier BV, 2025-03-01)This article employs a family of VAR models with time-varying parameters and stochastic volatility (TVP-VAR-SV) to estimate the impact of external financial uncertainty shocks on a set of macroeconomic variables in Peru for the period from 1996Q1 to 2022Q4. The main findings can be summarized as follows: (i) a simple VAR model with stochastic volatility is sufficient to capture uncertainty dynamics compared to TVP-VAR alternatives; (ii) uncertainty shocks have a negative and significant impact on private investment growth in the medium and long term; (iii) the impact on private investment growth is three times greater than that on GDP growth; (iv) uncertainty shocks behave like aggregate supply shocks, leading to an increase in the inflation rate; and (v) uncertainty shocks have stronger effects in scenarios characterized by unfavorable financial conditions.1