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An empirical approximation of the natural rate of interest and potential growth

  • Marta Manrique

    ()

    (Banco de España)

  • José Manuel Marqués

    ()

    (Banco de España)

The aim of this paper is to isolate the long run movements on equilibrium interest rate (or natural rate of interest) and potential growth. This estimations has been compute for US and Germany using a methodology developed by Laubach and Williams that is based on a Kalman Filter estimation of this two unobserved variables in a reduce structural model. The results match properly with the generally accepted periods of recessions and points to a reduced variation of the natural rate of interest, the potential growth and the business cycle during the last decade. This lower variation question the effects on the policy design from recent events like the "new economy". Moreover, we find that recently the natural rate of interest had rose in US and exhibits a moderate deceleration on Germany, that seems compatible with the different effect of new technologies for both economies. Moreover, the paper reached some aspects of the current monetary policy stance in both countries.

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File URL: http://www.bde.es/f/webbde/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/dt0416e.pdf
File Function: First version, September 2004
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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/04/Fic/dt0416.pdf
File Function: First Spanish version, September 2004
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0416.

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Length: 30 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:bde:wpaper:0416
Contact details of provider: Web page: http://www.bde.es/
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