Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19499
Authors: 
Clark, Todd E.
Kozicki, Sharon
Year of Publication: 
2004
Series/Report no.: 
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,32
Abstract: 
We use a range of simple models and 22 years of real-time data vintages for the U.S. to assess the difficulties of estimating the equilibrium real interest rate in real time. Model specifications differ according to whether the time-varying equilibrium real rate is linked to trend growth, and whether potential output and growth are defined by the CBO?s estimates or treated as unobserved variables. Our results reveal a high degree of specification uncertainty, an important one-sided filtering problem, and considerable imprecision due to data uncertainty. Also, the link between trend growth and the equilibrium real rate is shown to be quite weak. Overall, we conclude that statistical estimates of the equilibrium real rate will be difficult to use reliably in practical policy applications.
Subjects: 
real-time-data
time-varying parameter
Kalman filter
trend growth
JEL: 
E52
C3
E4
C5
Document Type: 
Working Paper

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