http://www.bis.org/cbhub/list/country/country_peru/index.rss Latest research hub papers from Peru en http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2013/documento-de-trabajo-02-2013.pdf Central Reserve Bank of Peru Working Papers by Francisco Ceballos, Tatiana Didier, Constantino Hevia, Sergio Schmukler Policy Responses to the Global Financial Crisis: What Did Emerging Economies Do Differently? 2013-01-31T13:14:59Z In contrast to the past, many emerging countries faced the global financial crisis of 2008-2009 with more solid financial positions and the required credibility and capacity to conduct countercyclical policies. This allowed them to better cope with the global downturn and thus behave more similarly to developed countries. This paper documents the policy responses and discusses other factors that allowed emerging countries to partially absorb the negative external shock. In particular, it characterizes (i) monetary and exchange rate policies, (ii) fiscal policy, and (iii) external and domestic financial positions. Policy Responses to the Global Financial Crisis: What Did Emerging Economies Do Differently? 2013-01-31T13:14:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2013/documento-de-trabajo-02-2013.pdf Sergio Schmukler Francisco Ceballos Tatiana Didier Constantino Hevia Francisco Ceballos, Tatiana Didier, Constantino Hevia, Sergio Schmukler 2013-01 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-23-2012.pdf Central Reserve Bank of Peru Working Papers by Diego Winkelried Predicting quarterly aggregates with monthly indicators 2012-12-29T06:23:00Z Many important macroeconomic variables measuring the state of the economy are sampled quarterly and with publication lags, although potentially useful predictors are observed at a higher frequency almost in real time. This situation poses the challenge of how to best use the available data to infer the state of the economy. This paper explores the merits of the so-called Mixed Data Sampling (MIDAS) approach that directly exploits the information content of monthly indicators to predict quarterly Peruvian macroeconomic aggregates. To this end, we propose a simple extension, based on the notion of smoothness priors in a distributed lag model, that weakens the restrictions the traditional MIDAS approach imposes on the data to achieve parsimony. We also discuss the workings of an averaging scheme that combines predictions coming from non-nested specifications. It is found that the MIDAS approach is able to timely identify, from monthly information, important signals of the dynamics of the quarterly aggregates. Thus, it can deliver significant gains in prediction accuracy, compared to the performance of competing models that use exclusively quarterly information. Predicting quarterly aggregates with monthly indicators 2012-12-29T06:23:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-23-2012.pdf Diego Winkelried Diego Winkelried 2012-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-20-2012.pdf Central Reserve Bank of Peru Working Papers by Liu Mendoza and Daniel Morales Constructing a real-time coincident recession index: an application to the Peruvian economy 2012-11-14T06:21:59Z In everyday macroeconomic analysis, businessmen and policymakers monitor many variables in order to assess the current situation of a country's business cycle. However, making this assessment is extremely difficult, especially on the verge of recessions: does a drop in one or more of these series reveal the beginning of a recession? Or is it a signal of a temporal deceleration? To answer these questions we have constructed a monthly probabilistic coincident index to detect how close we are of a recession in the Peruvian economy using a non-linear Markov-switching model. In the construction of this index, we have explored the informational content of tendency surveys and international economic variables. We find that the index detected with promptness and reliability the recent recession period associated with the international financial crisis even in real-time analysis. However, since it has been developed with information comprising eight years due to limited data availability, its future recession detection capability has yet to endure the test of time. Constructing a real-time coincident recession index: an application to the Peruvian economy 2012-11-14T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-20-2012.pdf Liu Mendoza Daniel Morales Liu Mendoza and Daniel Morales 2012-11 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-22-2012.pdf Central Reserve Bank of Peru Working Papers by Renzo Rossini, Zenón Quispe and Jorge Loyola Fiscal policy considerations in the design of monetary policy in Peru 2012-11-14T06:21:59Z We evaluate the financial and real linkages between fiscal and monetary policy in Peru, and show that during the recent export commodity price boom, public finances supported the implementation of monetary policy. In particular, the reduction of the net public debt has translated into a greater capability by the Central Bank to sterilize its FOREX interventions. Also, an active policy to enhance the development of the local capital markets, using the issuance of public bonds denominated in local currency as a benchmark, has created the incentive to de-dollarize banking credit. On the other hand, difficulty in fine-tuning public investment around the business cycle in recent years has led to periods of a fiscal stance that does not counteract the real business cycle. This raises the question of the possibility of adopting a structural rule for the public sector balance, based on structural fundamentals. Fiscal policy considerations in the design of monetary policy in Peru 2012-11-14T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-22-2012.pdf Zenón Quispe Renzo Rossini Jorge Loyola Renzo Rossini, Zenón Quispe and Jorge Loyola 2012-11 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-19-2012.pdf Central Reserve Bank of Peru Working Papers by Bennett T. McCallum The Role of Money in New-Keynesian Models 2012-10-17T09:15:00Z In this paper Professor McCalllum reviews the different forms researchers have attempted to introduce a meaningful role of Money in New-keynesian models typically used in the monetary policy analysis at central banks. The paper concludes that, there is still no convincing argument toward the need of including monetary aggregates into the structure of New Keynesian models. The Role of Money in New-Keynesian Models 2012-10-17T09:15:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-19-2012.pdf Bennett T. McCallum Bennett T. McCallum 2012-10 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-18-2012.pdf Central Reserve Bank of Peru Working Papers by Diego Winkelried and José Enrique Gutierrez Regional inflation dynamics and inflation targeting in Peru 2012-10-11T12:37:00Z The Central Reserve Bank of Peru (BCRP) has been targeting inflation for more than a decade, using Lima's inflation as the operational measure. An alternative indicator is countrywide inflation, whose quality and real-time availability have improved substantially lately. Hence, given these two somehow competing measures of inflation, two interesting policy questions arise: what have been the implications for national inflation of targeting Lima's inflation? Would shifting to a national aggregate significantly affect the workings of monetary policy in Peru? To answer these questions, we estimate an error correction model of regional inflations and investigate how shocks propagate across the country. The model incorporates (i) aggregation restrictions whereby each regional inflation is affected by an aggregate of neighboring regions, and (ii) long-run restrictions that uncover a single common trend in the system. The results indicate that a shock to Lima's inflation is transmitted fast and strongly elsewhere in the country. This constitutes supporting evidence to the view that by targeting Lima's inflation, the BCRP has effectively, albeit indirectly, targeted national inflation. Regional inflation dynamics and inflation targeting in Peru 2012-10-11T12:37:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-18-2012.pdf José Enrique Gutierrez Diego Winkelried Diego Winkelried and José Enrique Gutierrez 2012-10 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-16-2012.pdf Central Reserve Bank of Peru Working Papers by César Carrera Long-Run Money Demand in Latin-American countries: A Nonestationary Panel Data Approach 2012-08-27T18:23:00Z Central banks have long been interested in obtaining precise estimations of money demand given the fact that the evolution of money demand plays a key role over several monetary variables. I use Pedroni's (2002) Fully Modified Ordinary Least Square (FMOLS) to estimate the coefficients of the long-run money demand function for 15 Latin-American countries. The FMOLS technique pool information regarding common long-run relationships while allowing the associated short-run dynamics and fixed effects to be heterogeneous across different members of the panel. For this group of countries, I find evidence of a cointegrating money demand, an income elasticity of 0.94, and an interest-rate semi-elasticity of -0.01. Long-Run Money Demand in Latin-American countries: A Nonestationary Panel Data Approach 2012-08-27T18:23:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-16-2012.pdf César Carrera César Carrera 2012-08 Central Reserve Bank of Peru Working Papers C22 C23 E41 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-14-2012.pdf Central Reserve Bank of Peru Working Papers by César Carrera and Hugo Vega Interbank Market and Macroprudential Tools in a DSGE Model 2012-06-28T06:23:59Z The interbank market helps regulate liquidity in the banking sector. Banks with outstanding resources usually lend to banks that are in needs of liquidity. Regulating the interbank market may actually benefit the policy stance of monetary policy. Introducing an interbank market in a general equilibrium model may allow better identification of the final effects of non-conventional policy tools such as reserve requirements. We introduce an interbank market in which there are two types of private banks and a central bank that has the ability to issue money into a DSGE model. Then, we use the model to analyse the effects of changes to reserve requirements (a macroprudential tool), while the central bank follows a Taylor rule to set the policy interest rate. We find that changes to reserve requirements have similar effects to interest rate hikes and that both monetary policy tools can be used jointly in order to avoid big swings in the policy rate (that could have an undesired effect on private expectations) or a zero bound (i.e. liquidity trap scenarios). Interbank Market and Macroprudential Tools in a DSGE Model 2012-06-28T06:23:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-14-2012.pdf César Carrera Hugo Vega César Carrera and Hugo Vega 2012-06 Central Reserve Bank of Peru Working Papers E31 O42 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-13-2012.pdf Central Reserve Bank of Peru Working Papers by Daniel Kapp and Marco Vega The Real Output Costs of Financial Crisis: A Loss Distribution Approach 2012-05-24T06:21:59Z We study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP loss probability density function and the percentiles associated to extreme events due to financial crises. We find that output losses arising from financial crises are strongly heterogeneous and that currency crises lead to smaller output losses than debt and banking crises. Extreme global financial crises episodes, occurring with a one percent probability every five years, lead to losses between 2.95% and 4.54% of world GDP. The Real Output Costs of Financial Crisis: A Loss Distribution Approach 2012-05-24T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-13-2012.pdf Marco Vega Daniel Kapp Daniel Kapp and Marco Vega 2012-05 Central Reserve Bank of Peru Working Papers C15 G01 G17 G22 G32 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-12-2012.pdf Central Reserve Bank of Peru Working Papers by Diether W. Beuermann, Christopher McKelvey and Carlos Sotelo Lopez The Effects of Mobile Phone Infrastructure: Evidence from Rural Peru 2012-04-25T12:37:59Z We exploit the timing of cell phone coverage in rural Peru to investigate its effects on economic development. We exploit information regarding the location, date of installation and technical characteristics of cell phone towers in order to construct coverage patterns at the village level from 2001 through 2007. We then merge this information with national household surveys spanning the same period. Estimates suggest an increase of 7 percentage points in the likelihood of self reported cell phone ownership after coverage, an increase of 7.5 percent in yearly household expenditures, and a 13.5 percent increase in the value of assets. The Effects of Mobile Phone Infrastructure: Evidence from Rural Peru 2012-04-25T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-12-2012.pdf Diether W. Beuermann Carlos Sotelo Lopez Christopher McKelvey Diether W. Beuermann, Christopher McKelvey and Carlos Sotelo Lopez 2012-04 Central Reserve Bank of Peru Working Papers O1 O3 Q13 Q16 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-11-2012.pdf Central Reserve Bank of Peru Working Papers by Diego Winkelried and Miguel Angel Saldarriaga Trade linkages and growth in Latin America: A time-varying SVAR approach 2012-04-25T12:37:59Z This paper examines how shocks originated in large economies around the globe have transmitted to the growth rates of Latin American countries. For this purpose, a highly parsimonious structural VAR model - identified through bilateral trade linkages - is proposed, tested, estimated and simulated. Since trade weights evolve through time, the effect of shocks are time-varying. Thus, we are able to quantify how growth in the region has been affected by tighter trading linkages with fast-growing emerging economies, and how it has responded to a new world trade structure, featuring China as a major player. It is found that about half of the vigourous growth reported in Latin American countries by the end of the 2000s can be attributed to (direct and especially indirect) multiplier effects induced by the spectacular growth of the Chinese economy over the same period. Trade linkages and growth in Latin America: A time-varying SVAR approach 2012-04-25T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-11-2012.pdf Diego Winkelried Miguel Angel Saldarriaga Diego Winkelried and Miguel Angel Saldarriaga 2012-04 Central Reserve Bank of Peru Working Papers C32 C50 E32 F44 O54 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-09-2012.pdf Central Reserve Bank of Peru Working Papers by Philippe Bacchetta, Kenza Benhima and Yannick Kalantzis Capital Controls with International Reserve Accumulation: Can this Be Optimal? 2012-04-25T12:37:59Z Motivated by the Chinese experience, we analyze a semi-open economy where the central bank has access to international capital markets, but the private sector has not. This enables the central bank to choose an interest rate different from the international rate. We examine the optimal policy of the central bank by modelling it as a Ramsey planner who can choose the level of domestic public debt and of international reserves. The central bank can improve savings opportunities of credit-constrained consumers modelled as in Woodford (1990). We find that in a steady state it is optimal for the central bank to replicate the open economy, i.e., to issue debt financed by the accumulation of reserves so that the domestic interest rate equals the foreign rate. When the economy is in transition, however, a rapidly growing economy has a higher welfare without capital mobility and the optimal interest rate differs from the international rate. We argue that the domestic interest rate should be temporarily above the international rate. We also find that capital controls can still help reach the first best when the planner has more fiscal instruments. Capital Controls with International Reserve Accumulation: Can this Be Optimal? 2012-04-25T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-09-2012.pdf Philippe Bacchetta Kenza Benhima Yannick Kalantzis Philippe Bacchetta, Kenza Benhima and Yannick Kalantzis 2012-04 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-07-2012.pdf Central Reserve Bank of Peru Working Papers by Arturo Ormeño Using Survey Data on Inflation Expectations in the Estimation of Learning and Rational Expectations Models 2012-02-22T09:31:59Z Do survey data on inflation expectations contain useful information for estimating macroeconomic models? I address this question by using survey data in the New Keynesian model by Smets and Wouters (2007) to estimate and compare its performance when solved under the assumptions of Rational Expectations and learning. This information serves as an additional moment restriction and helps to determine the forecasting model for inflation that agents use under learning. My results reveal that the predictive power of this model is improved when using both survey data and an admissible learning rule for the formation of inflation expectations. Using Survey Data on Inflation Expectations in the Estimation of Learning and Rational Expectations Models 2012-02-22T09:31:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-07-2012.pdf Arturo Ormeño Arturo Ormeño 2012-02 Central Reserve Bank of Peru Working Papers C11 D84 E30 E52 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-05-2012.pdf Central Reserve Bank of Peru Working Papers by Erick Lahura Measuring the Effects of Monetary Policy Using Market Expectations 2012-01-25T06:21:00Z In order to quantify the effects of monetary policy, this paper employs an alternative empirical measure of monetary policy shocks based on market expectations obtained from media and survey information in Peru. Using monthly data for the period 2003-2011, we use the proposed measure as a source of exogenous variation in monetary policy and evaluate its dynamic impact on output and prices. The results show a coherent picture of the effects of monetary policy compared to alternative approaches in terms of both the magnitude and the timing of the effects. Measuring the Effects of Monetary Policy Using Market Expectations 2012-01-25T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-05-2012.pdf Erick Lahura Erick Lahura 2012-01 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-02-2012.pdf Central Reserve Bank of Peru Working Papers by Hugo Vega Financial Frictions and the Interest-Rate Differential in a Dollarized Economy 2012-01-18T06:21:00Z This paper presents a partial equilibrium characterization of the credit market in an economy with partial ?financial dollarization. Financial frictions, in the form of costly state veri?cation and banking regulation restrictions, are introduced and their impact on lending and deposit interest rates denominated in domestic and foreign currency studied. The analysis shows that reserve requirements act as a tax that leads banks to decrease deposit rates, while the wedge between foreign and domestic currency lending rates is decreasing in exchange rate volatility and increasing in the degree of correlation between entrepreneur?s returns and the exchange rate. Financial Frictions and the Interest-Rate Differential in a Dollarized Economy 2012-01-18T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-02-2012.pdf Hugo Vega Hugo Vega 2012-01 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-03-2012.pdf Central Reserve Bank of Peru Working Papers by Ruy Lama and Carlos Urrutia Employment Protection and Business Cycles in Emerging Economies 2012-01-18T06:21:00Z We build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in recessions. In a quantitative version of the model calibrated to the Mexican economy we find that reducing separation costs to a level consistent with developed economies would reduce output volatility by 15 percent. We also use the model to analyze the Mexican crisis episode of 2008 and conclude that an economy with lower separation costs would have experienced a smaller drop in output and in measured total factor productivity with no significant change in aggregate employment. Employment Protection and Business Cycles in Emerging Economies 2012-01-18T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-03-2012.pdf Ruy Lama Carlos Urrutia Ruy Lama and Carlos Urrutia 2012-01 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-04-2012.pdf Central Reserve Bank of Peru Working Papers by César Carrera Estimating Information Rigidity using Firms' Survey Data 2012-01-18T06:21:00Z The slope of the sticky information Phillips curve proposed by Mankiw and Reis (2002) is based on the degree of information rigidity on the part of firms. Carroll (2003) uses an epidemiology model of expectations and finds evidence for the U.S. of a one-year lag in the transmission of information from professional forecasters to households. Using financial institutions? and firms? survey data from Peru and the model proposed by Carroll, I estimate the degree of information rigidity for the Peruvian economy. This paper also considers heterogeneous responses and explores the cross-sectional dimension of these survey forecasts. I find that the degree of information stickiness is such that it takes between one and three quarters for updating information, a result that is robust to different specifications. Estimating Information Rigidity using Firms' Survey Data 2012-01-18T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-04-2012.pdf César Carrera César Carrera 2012-01 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-22-2011.pdf Central Reserve Bank of Peru Working Papers by Rocio Gondo and Fabrizio Orrego Dedollarization and financial robustness 2011-12-30T06:21:00Z This paper evaluates the qualitative and quantitative implications of financial dedollarization of firms' liabilities on real aggregates in a small open economy model. We extend the standard Cespedes, Chang, and Velasco (2004) model by allowing entrepreneurs borrow in both foreign and domestic currency so as to finance firms' capital needs. A real depreciation reduces the value of firms' net worth whenever there is a currency mismatch in their balance sheets. Under flexible exchange rates, a lower degree of dollarization lessens the negative impact on output and investment, since there is a smaller increase in the cost of external borrowing. The quantitative results show that the balance sheet channel accounts for about 70 percent of the output and investment drop in Peru following the Russian Crisis, and a reduction in debt dollarization would have reduced output drop in 0.9 percentage points of GDP. Dedollarization and financial robustness 2011-12-30T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-22-2011.pdf Rocio Gondo Fabrizio Orrego Rocio Gondo and Fabrizio Orrego 2011-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-19-2011.pdf Central Reserve Bank of Peru Working Papers by Erick Lahura and Marco Vega Wavelet-based Core Inflation Measures: Evidence from Peru 2011-12-21T12:39:59Z Under inflation targeting and other related monetary policy regimes, the identification of non-transitory in ation and forecasts about future inflation constitute key ingredients for monetary policy decisions. In practice, central banks perform these tasks using so-called "core inflation measures". In this paper we construct alternative core inflation measures using wavelet functions and multiresolution analysis (MRA), and then evaluate their relevance for monetary policy. The construction of wavelet-based core inflation measures (WIMs) is relatively new in the literature and their assessment has not been addressed formally, this paper being the first attempt to perform both tasks for the case of Peru. Another main contribution of this paper is that it proposes a VAR-based long-run criterion as an alternative criteria for evaluating core inflation measures. Evidence from Peru shows that WIMs are superior to official core inflation in terms of both the proposed criterion and forecast-based criteria. Wavelet-based Core Inflation Measures: Evidence from Peru 2011-12-21T12:39:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-19-2011.pdf Marco Vega Erick Lahura Erick Lahura and Marco Vega 2011-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-17-2011.pdf Central Reserve Bank of Peru Working Papers by Ingo Outes, Catherine Porter, Alan Sanchez, Javier Escobal Early Nutrition and Cognition in Peru: A Within-Sibling Investigation 2011-12-20T12:37:59Z An extensive literature documents linkages between early nutritional deficiencies and reduced cognitive ability, educational attainment and, ultimately, lower labor market performance. Few of these studies, however, have shown these correlations to be genuinely causal. We reexamine the nutrition and cognition link, applying instrumental variable methods to a sibling-difference specification for a sample of Peruvian pre-school children. We use household shocks and food price changes as instruments. As such our analysis also quantifies the nutritional and cognitive costs of the 2006-08 global food price crisis. We find that there are significant and negative cognitive effects of early childhood nutritional disinvestments: a decrease in Height-for-Age z-score leads to a reduction in the Peabody Picture Vocabulary Test score of 17-21 percent. The accumulated deficits are sizeable considering that these children are only 3-6 years old and are yet to enroll in formal schooling, with deficits likely to widen in later years. Early Nutrition and Cognition in Peru: A Within-Sibling Investigation 2011-12-20T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-17-2011.pdf Javier Escobal Alan Sanchez Catherine Porter Ingo Outes Ingo Outes, Catherine Porter, Alan Sanchez, Javier Escobal 2011-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-18-2011.pdf Central Reserve Bank of Peru Working Papers by Erick Lahura An Empirical Analysis of the Credit-Output Relationship: Evidence from Peru 2011-12-20T12:37:59Z This paper investigates the empirical relationship between credit and output in Peru. The analysis is based on the estimation of vector error correction models and the identification of structural shocks. The models considered include real output, real credit growth (in domestic currency, foreign currency and both), and terms of trade. Using quarterly data for the period 1994-2011, the results suggest that real credit growth contain useful information to understand the evolution of the non-deterministic component of real output. In particular, the results show that: (i) there exist a stable long-run relationship between real credit growth, output and terms of trade, (ii) real credit growth is useful in forecasting output in the long-run, and (iii) a structural permanent shock in real credit has positive permanent effects on output. Therefore, credit aggregates could be useful as indicator variables for policymakers. An Empirical Analysis of the Credit-Output Relationship: Evidence from Peru 2011-12-20T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-18-2011.pdf Erick Lahura Erick Lahura 2011-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-14-2011.pdf Central Reserve Bank of Peru Working Papers by Fabrizio Orrego Sequential incompleteness and dynamic suboptimality in stochastic OLG economies with production 2011-08-03T06:21:59Z I study a stochastic overlapping generations model with production and three-period- lived agents. Agents trade bonds and risky capital. Unlike the two-period model, I show that a stationary equilibrium in which prices and allocations depend solely on the aggregate capital stock and the current shock does not exist. The recursive equilibrium becomes the relevant equilibrium concept. For the recursive formulation of the model, markets are sequentially incomplete and hence I show that there is room for Pareto improvements in terms of intergenerational risk sharing. Finally, I examine whether the introduction of capital income taxation improves the allocation of risk. Sequential incompleteness and dynamic suboptimality in stochastic OLG economies with production 2011-08-03T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-14-2011.pdf Fabrizio Orrego Fabrizio Orrego 2011-08 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-13-2011.pdf Central Reserve Bank of Peru Working Papers by Fabrizio Orrego Habit formation and sunspots in overlapping generations models 2011-08-03T06:21:59Z I introduce habit formation into an otherwise standard overlapping generations economy with pure exchange populated by three-period-lived agents. Habits are modeled in such a way that current consumption increases the marginal utility of future consumption. With logarithmic utility functions, I demonstrate that habit formation may give rise to stable monetary steady states in economies with hump-shaped endowment pro?les and reasonably high discount factors. Intuitively, habits imply adjacent complementarity in consumption, which in turn helps explain why income effects are sufficiently strong in spite of logarithmic utility. The longer horizon further strengthens the income effect. Finally, I use the bootstrap method to construct stationary sunspot equilibria for those economies in which the steady state is locally stable. Habit formation and sunspots in overlapping generations models 2011-08-03T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-13-2011.pdf Fabrizio Orrego Fabrizio Orrego 2011-08 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-12-2011.pdf Central Reserve Bank of Peru Working Papers by Diego Winkelried Exchange rate pass-through and inflation targeting in Peru 2011-08-03T06:21:59Z It has been widely documented that the exchange rate pass-through to domestic inflation has decreased significantly in most of the industralised world. As microeconomic factors cannot completely explain such a widespread phenomenon, a macroeconomic explanation linked to the inflationary environment - that a low and more stable inflation rate leads to a decrease in the pass-through - have gained popularity. Using a structural VAR framework, this paper presents evidence of a similar decline in the pass-through in Peru, a small open economy that gradually reduced inflation to international levels in order to adopt a fully-fledged inflation targeting scheme in 2002. It is argued that the establishment of a credible regime of low inflation has been instrumental in driving the exchange rate pass-through down. Exchange rate pass-through and inflation targeting in Peru 2011-08-03T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-12-2011.pdf Diego Winkelried Diego Winkelried 2011-08 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-11-2011.pdf Central Reserve Bank of Peru Working Papers by Alberto Cavallo and Roberto Rigobon The Distribution of the Size of Price Changes 2011-07-02T06:21:59Z Different theories of price stickiness have distinct implications on the number of modes in the distribution of price changes. We formally test for the number of modes in the price change distribution of 36 supermarkets, spanning 22 countries and 5 continents. We present results for three modality tests: the two best-known tests in the statistical literature, Hartigan's Dip and Silverman's Bandwidth, and a test designed in this paper, called the Proportional Mass test (PM). Three main results are uncovered. First, when the traditional tests are used, unimodality is rejected in about 90 percent of the retailers. When we used the PM test, which reduces the impact of smaller modes in the distribution and can be applied to test for modality around zero percent, we still reject unimodality in two thirds of the supermarkets. Second, category-level heterogeneity can account for about half of the PM test's rejections of unimodality. Finally, a simulation of the model in Alvarez, Lippi, and Paciello (2010) shows that the data is consistent a combination of both time and state-dependent pricing behaviors. The Distribution of the Size of Price Changes 2011-07-02T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-11-2011.pdf Alberto Cavallo Roberto Rigobon Alberto Cavallo and Roberto Rigobon 2011-06 Central Reserve Bank of Peru Working Papers