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An Update on the Neutral Rate of Interest

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Abstract

The neutral rate serves as a benchmark for measuring monetary stimulus and provides a medium- to long-run anchor for the real policy rate. Global neutral rate estimates have been falling over the past few decades. Factors such as population aging, high corporate savings, and low trend productivity growth are likely to continue supporting a low global neutral rate. These global factors as well as domestic factors are exerting downward pres-sure on the Canadian real neutral rate, which is estimated to be between 0.5 to 1.5 per cent. This low neutral rate has important implications for monetary policy and financial stability.

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  • José Dorich & Abeer Reza & Subrata Sarker, 2017. "An Update on the Neutral Rate of Interest," Bank of Canada Review, Bank of Canada, vol. 2017(Autumn), pages 27-41.
  • Handle: RePEc:bca:bcarev:v:2017:y:2017:i:autumn17:p:27-41
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Perceptions of the neutral interest rate
      by Bruno Duarte in EUnomics on 2018-09-17 17:42:36

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