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An empirical approximation of the natural rate of interest and potential growth

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  • Marta Manrique

    ()
    (Banco de España)

  • José Manuel Marqués

    ()
    (Banco de España)

Abstract

The aim of this paper is to isolate the long run movements on equilibrium interest rate (or natural rate of interest) and potential growth. This estimations has been compute for US and Germany using a methodology developed by Laubach and Williams that is based on a Kalman Filter estimation of this two unobserved variables in a reduce structural model. The results match properly with the generally accepted periods of recessions and points to a reduced variation of the natural rate of interest, the potential growth and the business cycle during the last decade. This lower variation question the effects on the policy design from recent events like the "new economy". Moreover, we find that recently the natural rate of interest had rose in US and exhibits a moderate deceleration on Germany, that seems compatible with the different effect of new technologies for both economies. Moreover, the paper reached some aspects of the current monetary policy stance in both countries.

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File URL: http://www.bde.es/f/webbde/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/dt0416e.pdf
File Function: First version, September 2004
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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/04/Fic/dt0416.pdf
File Function: First Spanish version, September 2004
Download Restriction: no

Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0416.

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Length: 30 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:bde:wpaper:0416

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Cited by:
  1. Lombardi, Marco J. & Sgherri, Silvia, 2007. "(Un)naturally low? Sequential Monte Carlo tracking of the US natural interest rate," Working Paper Series 0794, European Central Bank.
  2. Julien Garnier & Bjørn-Roger Wilhelmsen, 2009. "The natural rate of interest and the output gap in the euro area: a joint estimation," Empirical Economics, Springer, vol. 36(2), pages 297-319, May.
  3. Juan José Echavarría Soto & Enrique López Enciso & Martha Misas Arango & Juana Téllez Corredor & Juan Carlos Parra Alvarez, . "La Tasa de Interés Natural en Colombia," Borradores de Economia 412, Banco de la Republica de Colombia.
  4. Horvath, Roman, 2006. "Real-Time Time-Varying Equilibrium Interest Rates: Evidence on the Czech Republic," MPRA Paper 845, University Library of Munich, Germany.
  5. Garnier, Julien & Wilhelmsen, Bjørn-Roger, 2005. "The natural real interest rate and the output gap in the euro area: a joint estimation," Working Paper Series 0546, European Central Bank.
  6. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Banco de Espa�a Working Papers 0513, Banco de Espa�a.
  7. Alexius, Annika & Welz, Peter, 2006. "Can a time-varying equilibrium real interest rate explain the excess sensitivity puzzle?," Working Paper Series 2006:20, Uppsala University, Department of Economics.
  8. Jean-Stéphane MESONNIER, 2007. "The predictive content of the real interest rate gap for macroeconomic variables in the euro area," Money Macro and Finance (MMF) Research Group Conference 2006 102, Money Macro and Finance Research Group.
  9. Rodrigo Fuentes S & Fabián Gredig U., 2008. "The Neutral Interest Rate: Estimates for Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(2), pages 47-58, August.

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