The Information Content of the Natural Rate of Interest: The Case of Poland
In this paper, I use a structural VAR model and the Kalman filter to estimate the natural rate of interest (NRI) in Poland. I show how the NRI can yield important information for a central banker. First, estimation of the NRI can be helpful for monetary authorities, seeking to stabilize inflation after a long process of disinflation. Second, for a country trying to join a monetary union there exists an additional information content of the estimated NRI. The bigger the difference between the candidates and the Unions natural rates, the more likely the “Portuguese” scenario of a widening current account after adopting the common currency.
|Date of creation:||04 Feb 2004|
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