Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153242
Authors: 
Tristani, Oreste
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 808
Abstract: 
This paper analyses the determinants of the natural rate of interest in a non-linear model where agents are uncertain over both future technology growth and the future course of monetary policy. I show that the real natural rate can be affected by sizable uncertainty premia, including premia associated with monetary un-certainty. This result is potentially problematic for both the estimation of the natural rate and its use as a policy indicator. Monetary uncertainty can also contribute to amplify the equity premium, and to account for its apparent, positive link with inflation.
Subjects: 
equity premium puzzle
model misspecification
Natural rate of interest
risk-free rate puzzle
robust control
JEL: 
E43
G11
Document Type: 
Working Paper

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