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Box A: The Financial (In)Stability Real Interest Rate, R**, as a Monetary Policy Constraint

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  • Gianluca Benigno

Abstract

One of the central concepts in monetary policy is the natural or neutral real interest rate, usually referred to as r*. This is defined as the real rate consistent with real GDP equal to its potential in the absence of shocks to demand. In turn potential GDP is defined to be the level of output consistent with stable price inflation absent transitory supply shock.

Suggested Citation

  • Gianluca Benigno, 2024. "Box A: The Financial (In)Stability Real Interest Rate, R**, as a Monetary Policy Constraint," National Institute Global Economic Outlook, National Institute of Economic and Social Research, issue 13, pages 33-37.
    • Handle: RePEc:nsr:niesrb:i:13:y:2024:p:33-37
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