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Navigating the sea of natural real interest rate estimates

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  • Juselius, Mikael

Abstract

Recent inflationary trends have reignited debates about the natural real interest rate (r∗). This paper reviews the literature on estimating r∗ and its drivers, highlighting significant uncertainty and variability in estimates. The challenges in achieving consensus on r∗ is mostly due to differing methodologies and model assumptions. Understanding these sources of uncertainty is essential for shaping future monetary policy, especially in a low interest rate environment where conventional policy tools may be limited.

Suggested Citation

  • Juselius, Mikael, 2025. "Navigating the sea of natural real interest rate estimates," BoF Economics Review 3/2025, Bank of Finland.
    • Handle: RePEc:zbw:bofecr:331241
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    References listed on IDEAS

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    JEL classification:

    • 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

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