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Working Paper
Estimating equilibrium real interest rates in real time
We use a range of simple models and 22 years of real-time data vintages for the U.S. to assess the difficulties of estimating the equilibrium real interest rate in real time. Model specifications differ according to whether the time-varying equilibrium real rate is linked to trend growth, and whether potential output and growth are defined by the CBO's estimates or treated as unobserved variables. Our results reveal a high degree of specification uncertainty, an important one-sided filtering problem, and considerable imprecision due to data uncertainty. Also, the link between trend growth and ...