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Measuring the Financial Stability Real Interest Rate, r*

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Abstract

Comparing our financial stability real interest rate, r** (“r-double-star”) with the prevailing real interest rate gives a measure of how vulnerable the economy is to financial instability. In this post, we first explain how r** can be measured, and then discuss its evolution over the last fifty years and how to interpret the recent banking turmoil within this framework.

Suggested Citation

  • Ozge Akinci & Gianluca Benigno & Marco Del Negro & Ethan Nourbash & Albert Queraltó, 2023. "Measuring the Financial Stability Real Interest Rate, r*," Liberty Street Economics 20230524, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:96202
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    File URL: https://libertystreeteconomics.newyorkfed.org/2023/05/measuring-the-financial-stability-real-interest-rate-r/
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    More about this item

    Keywords

    financial stability; financial crisis; financial stress; r**; Real interest rate; financial crises;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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