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Working Paper
Measuring the Natural Rate of Interest : International Trends and Determinants
U.S. estimates of the natural rate of interest ? the real short-term interest rate that would prevail absent transitory disturbances ? have declined dramatically since the start of the global financial crisis. For example, estimates using the Laubach-Williams (2003) model indicate the natural rate in the United States fell to close to zero during the crisis and has remained there through the end of 2015. Explanations for this decline include shifts in demographics, a slowdown in trend productivity growth, and global factors affecting real interest rates. This paper applies the ...
Working Paper
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.