Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277750 
Year of Publication: 
2023
Series/Report no.: 
Würzburg Economic Papers No. 106
Publisher: 
University of Würzburg, Department of Economics, Würzburg
Abstract: 
The necessary adjustments to prominent measures of the neutral rate of interest following the COVID pandemic sparked a wide-ranging debate on the measurement and usefulness of r-star. Due to high uncertainty about relevant determinants, trend patterns and the correct estimation method, we propose in this paper a simple alternative approach derived from a standard macro model. Starting from a loss function, neutral periods can be determined in which a neutral real interest rate is observable. Using these values, a medium-term trend for a neutral interest rate can be determined. An application to the USA shows that our simple calculation of a neutral interest rate delivers comparable results to existing studies. A Taylor rule based on our neutral interest rate also does a fairly good job of explaining US monetary policy over the past 60 years.
Subjects: 
Neutral rate of interest
equilibrium real interest rate
monetary policy rul
JEL: 
E3
E4
E5
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.