Abstract

ECHAVARRIA SOTO, JUAN JOSÉ et al. THE NATURAL RATE OF INTEREST IN COLOMBIA. Ens. polit. econ. [online]. 2007, vol.25, n.54, pp.44-89. ISSN 0120-4483.

In this article we estimate the natural real rate of interest (NRI) in Colombia for 1982 to 2005 based on the methodologies proposed by Laubach and Williams (2001) and Méssonier and Renne (2004). The NRI is estimated as a time varying latent variable within a Kalman Filter alongside the output gap. A New Keynesian framework is used to identify these variables. The results suggest that monetary policy was contractionary in 1998 and 1999, and relatively expansive in recent years. The output gap has been positive in 2003 and 2004, confi rming the results of other research.

Keywords : Natural rate of interest; latent variables; potential output; Kalman filter.

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