| 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. |