Discussion Paper

Measuring the Financial Stability Real Interest Rate, r**

Abstract: Comparing our financial stability real interest rate, r** (“r-double-star”) with the prevailing real interest rate gives a measure of how vulnerable the economy is to financial instability. In this post, we first explain how r** can be measured, and then discuss its evolution over the last fifty years and how to interpret the recent banking turmoil within this framework.

Keywords: financial stability; financial crisis; financial stress; r**; Real interest rate; financial crises;

JEL Classification: E52; G01; G1; G2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2023-05-24

Number: 20230524