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Measuring the Natural Interest Rate for the Macedonian Economy: A Multi-Model Approach

Author

Listed:
  • Miteski Mite

    (1 Senior Advisor Analyst, Monetary Policy and Research Department National Bank of the Republic of North Macedonia, Republic of North Macedonia)

  • Petrovska Magdalena

    (2 Senior Advisor, Monetary Policy and Research Department National Bank of the Republic of North Macedonia, Blvd Kuzman Josifovski Pitu 1 1000, Skopje, Republic of North Macedonia)

  • Sulejmani Artan

    (3 Analyst, Monetary Policy and Research Department National Bank of the Republic of North Macedonia Republic of North Macedonia)

Abstract

This paper identifies the natural interest rate for the Macedonian economy using quarterly data for 2001Q4-2019Q3. To this end, the estimation is made by using different types of models, such as the Holston, Laubach, and Williams model and the full-fledged country-specific structural MAKPAM model. The empirical results show that the natural rate of interest in the Macedonian economy has declined over time, which is similar to the findings for other countries. The decomposition of the natural rate suggests that the main driver for the decline is the slowdown of the Macedonian potential GDP growth in the period after the global economic crisis, although there are signs of its recovery at the end of the sample period. In addition, the results indicate that the monetary policy conditions in the Macedonian economy have been broadly accommodative from 2011Q4 onwards. The substantive conclusions are unchanged across the multiple models used in this study.

Suggested Citation

  • Miteski Mite & Petrovska Magdalena & Sulejmani Artan, 2023. "Measuring the Natural Interest Rate for the Macedonian Economy: A Multi-Model Approach," South East European Journal of Economics and Business, Sciendo, vol. 18(1), pages 176-193, June.
    • Handle: RePEc:vrs:seejeb:v:18:y:2023:i:1:p:176-193:n:5
    DOI: 10.2478/jeb-2023-0012
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    Cited by:

    1. Efendic Adnan, 2023. "Editorial," South East European Journal of Economics and Business, Sciendo, vol. 18(1), pages 1-1, June.

    More about this item

    Keywords

    Natural interest rate; interest rate gap; Holston; Laubach; and Williams model; MAKPAM Model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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