The natural rate of interest: which concept? which estimation method? which policy conclusions?
AbstractThe natural rate of interest has become popular again both in academic and monetary policy circles. But which concept are we actually talking about? This paper argues that there are manyâtheoretical and empiricalâuncertainties that limit the application of the natural rate in practical monetary policy. Examples of natural rate of interest estimates for the euro area are compared, as well as monetary policy rules derived from them. The paper concludes with a tentative longer-term perspective on the future outlook for the natural rate in the euro area, touching upon effects from aging, productivity developments, private and public savings, as well as globalization.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.
Volume (Year): 29 (2007)
Issue (Month): 4 (July)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348
globalization; interest rates; monetary policy; monetary policy rules; natural rate;
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- Philip Arestis & Alexander Mihailov, 2007.
"Flexible Rules cum Constrained Discretion: A New Consensus in Monetary Policy,"
Economic Analysis Research Group Working Papers
earg-wp2007-13, Henley Business School, Reading University.
- P Arestis & A Mihailov, 2009. "Flexible Rules cum Constrained Discretion: A New Consensus in Monetary Policy," Economic Issues Journal Articles, Economic Issues, vol. 14(2), pages 27-54, September.
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