Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152980
Authors: 
Garnier, Julien
Wilhelmsen, Bjørn-Roger
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 546
Abstract: 
The notion of a natural real rate of interest, due to Wicksell (1936), is widely used in current central bank research. The idea is that there exists a level at which the real interest rate would be compatible with output being at its potential and stationary inflation. This paper applies the method recently suggested by Laubach and Williams to jointly estimate the natural real interest rate and the output gap in the euro area over the past 40 years. Our results suggest that the natural rate of interest has declined gradually over the past 40 years. They also indicate that monetary policy in the euro area was on average stimulative during the 1960s and the 1970s, while it contributed to dampen the output gap and inflation in the 1980s and the 1990s.
Subjects: 
euro area
Kalman filter
output gap
Real interest rate gap
JEL: 
C32
E43
E52
O40
Document Type: 
Working Paper

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