Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331241 
Year of Publication: 
2025
Series/Report no.: 
BoF Economics Review No. 3/2025
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Recent inflationary trends have reignited debates about the natural real interest rate (r∗). This paper reviews the literature on estimating r∗ and its drivers, highlighting significant uncertainty and variability in estimates. The challenges in achieving consensus on r∗ is mostly due to differing methodologies and model assumptions. Understanding these sources of uncertainty is essential for shaping future monetary policy, especially in a low interest rate environment where conventional policy tools may be limited.
Subjects: 
natural real interest rate
monetary policy
JEL: 
E43
E52
Document Type: 
Research Report

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