Estimation of the neutral interest rate in Honduras
Abstract
The neutral interest rate is defined as that real interest rate at which the economy reaches its potential level of growth and inflation converges to the target rate. Provides a benchmark for measuring the monetary policy stance, being the policy expansive if the real interest rate is below of the neutral rate and being the policy contractionary if the real interest rate is above of the neutral rate. A characteristic of the neutral interest rate is that it is not observable and change over time, therefore it is necessary to estimate it. In this article, the neutral interest rate in Honduras is estimated using different methodologies
such as the Kalman filter for state space models (SS), VAR with time varying parameters (TVP-VAR), regression models with shrinkage in the time varying parameters (RegTVP) and different statistical filters. Ending with the comparison among the results obtained.
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Copyright (c) 2023 Cristian Cruz Torres
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