Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Measuring the Natural Rate of Interest : A Note on Transitory Shocks
We present evidence that the natural rate of interest is buffeted by both permanent and transitory shocks. We establish this result by estimating a benchmark model with Bayesian methods and loose priors on the unobserved drivers of the natural rate. When subject to transitory shocks, the median estimate for the U.S. economy is more procyclical, displays a less marked secular decline, and is therefore higher following the Great Recession than most estimates in the literature.
Cite this item
Kurt F. Lewis & Francisco Vazquez-Grande, Measuring the Natural Rate of Interest : A Note on Transitory Shocks, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2017-059, Jun 2017, revised 07 Aug 2018.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Keywords: Kalman filter; Monetary policy; Natural rate of interest; Pileup; Trend growth
This item with handle RePEc:fip:fedgfe:2017-59
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