Aggregate and Sectoral Shocks in the Peruvian Economy

This paper examines the evolution and dynamics of growth rates in the productive sectors of the Peruvian economy and analyzes the contribution of aggregate and idiosyncratic components to the variability of those growth rates. The study uses quarterly sector-specific data for the period 1981–2015 and performs the estimation using a dynamic factor model with time-varying coefficients and stochastic volatility. The results show that prior to 1992, aggregate shocks were more important in explaining the dynamics of the sectoral time series. However, in recent years, the idiosyncratic component has become more significant. This structural change in the behavior of the output time series is likely associated with the economic reforms implemented in Peru in the early 1990s.