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An International Approach to the Neutral Interest Rate

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  • Andres Blanco

Abstract

Following the COVID-19 recession, the US net international investment position, which is negative, declined to nearly 90 percent of national income. This decline coincided with an increase in long-term yields and a steady drop in net investment income. Increasing net savings is necessary to meet the US long-run budget constraint, suggesting that higher interest rates are needed to boost the net savings of US households and firms.

Suggested Citation

  • Andres Blanco, 2024. "An International Approach to the Neutral Interest Rate," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2024(7), pages 1-13, October.
    • Handle: RePEc:fip:a00068:99105
    DOI: 10.29338/ph2024-07
    as

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    References listed on IDEAS

    as
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    2. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 381-399.
    3. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    neutral interest rate; current account; net saving rate;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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