Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320099 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11878
Publisher: 
CESifo GmbH, Munich
Abstract: 
The natural interest rate is the real rate that would prevail in the long-run. The standard view in macroeconomics is that the natural rate depends exclusively on structural factors such as productivity growth and demographics. This paper challenges this view by discussing three alternative, and complementary, views: (i) that the natural rate depends on fiscal policy via the stock of risk-free assets; (ii) that it depends on monetary policy via the central bank inflation target; and (iii) that it depends on persistent supply shocks such as tariffs or wars. These three theories share the relevance of precautionary savings motives. We conclude by drawing some lessons for monetary policy design.
Subjects: 
HANK model
monetary-fiscal interactions
deep learning
cost-push shocks
JEL: 
E32
E58
E63
Document Type: 
Working Paper
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