Suchergebnisse

AbstractThe natural rate of interest, also known as R*, is a central concept for many monetary economists. Although policymakers and commentators make judgements based on an implicit belief regarding its value, attempts to measure it are quite rare. This article uses productivity data to estimate the natural rate for the UK economy during 1998–2018. It finds that the median real natural rate up to and including 2008:2 was 2.11 per cent and has been 1.9 per cent since then. This supports the view that the natural rate can change over time and has fallen in recent years. Policymakers who use the natural rate as a benchmark should therefore monitor this more closely.

We estimate a state-of-the-art DSGE model to study the natural rate of interest in the United States over the last 20 years. The natural rate is highly procyclical, and fell substantially below zero in each of the last three recessions. Although the drop was of comparable magnitude across the three recessions, the decline was considerably more persistent in the Great Recession. We discuss the usefulness and limitations, particularly due to the zero lower bound, of the natural rate for the conduct of monetary policy.

N/A