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An International Approach to the Neutral Interest Rate

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Listed:
  • 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
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Thomas Laubach & John C. Williams, 2003. "Measuring the Natural Rate of Interest," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1063-1070, November.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    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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