Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224546 
Year of Publication: 
2020
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2020: Gender Economics
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
Incorporating arbitrage-free term-structure dynamics into a semi-structural macro-model, we jointly estimate the real equilibrium interest rate (r*), trend inflation, and term premia for the United States and the euro area, using a Bayesian approach. The natural real rate and trend inflation are cornerstones determining equilibrium yields across maturities and macroeconomic trends. Taking into account the secular decline in equilibrium rates, term premia exhibit cyclical behavior over the business cycle, rather than the commonly reported trend. Our estimates suggest a fall in r* from a pre-crisis level of about 3% to around zero, but estimates are subject to sizeable uncertainty. Including survey expectations can lift r* estimates for recent quarters by a margin.
Subjects: 
Natural rate of interest
r*
equilibrium real rate
arbitrage-free Nelson-Siegel term structure model
term premia
unobserved components
Bayesian estimation
JEL: 
C11
C32
E43
G12
E44
E52
Document Type: 
Conference Paper

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