IDEAS home Printed from https://ideas.repec.org/p/zbw/svrwwp/300653.html
   My bibliography  Save this paper

A note on the synchronisation of the natural rates of interest in Germany and the Euro Area

Author

Listed:
  • Berger, Tino
  • Ochsner, Christian

Abstract

The European Central Bank (ECB) strives to maintain inflation at a 2% target rate, yet the Euro area's diverse economies pose challenges to achieving this goal with a single nominal interest rate. Effective monetary policy transmission hinges on synchronizing the Natural Rate of Interest (NRI) across constituent economies. This note investigates NRI synchronization between Germany, the largest Euro area economy, and the entire Euro area. Utilizing Bayesian estimation of the Holston et al. (2017) model, we find robust synchronization between Germany's NRI and that of the entire Euro area, even amid level differences, supporting effective monetary policy coordination.

Suggested Citation

  • Berger, Tino & Ochsner, Christian, 2024. "A note on the synchronisation of the natural rates of interest in Germany and the Euro Area," Working Papers 03/2024, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    • Handle: RePEc:zbw:svrwwp:300653
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/300653/1/1896929206.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Holston, Kathryn & Laubach, Thomas & Williams, John C., 2017. "Measuring the natural rate of interest: International trends and determinants," Journal of International Economics, Elsevier, vol. 108(S1), pages 59-75.
    2. Del Negro, Marco & Giannone, Domenico & Giannoni, Marc P. & Tambalotti, Andrea, 2019. "Global trends in interest rates," Journal of International Economics, Elsevier, vol. 118(C), pages 248-262.
    3. Tino Berger & Bernd Kempa, 2019. "Testing for time variation in the natural rate of interest," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(5), pages 836-842, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Beames & Mariano Kulish & Nadine Yamout, 2022. "Fiscal Policy and the Slowdown in Trend Growth in an Open Economy," Working Papers 143, Red Nacional de Investigadores en Economía (RedNIE).
    2. Lucio Gobbi & Ronny Mazzocchi & Roberto Tamborini, 2022. "Monetary policy, rational confidence, and Neo‐Fisherian depressions," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1179-1199, November.
    3. Jiaqian Chen & Daria Finocchiaro & Jesper Linde & Karl Walentin, 2023. "The costs of macroprudential deleveraging in a liquidity trap"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 991-1011, December.
    4. Brand, Claus & Goy, Gavin W & Lemke, Wolfgang, 2020. "Natural rate chimera and bond pricing reality," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224546, Verein für Socialpolitik / German Economic Association.
    5. Marcin Bielecki & Michał Brzoza-Brzezina & Aneta Błażejowska & Kamila Kuziemska-Pawlak & Grzegorz Szafrański, 2024. "Estimates and Projections of the Natural Rate of Interest for Poland and the Euro Area," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 1-32.
    6. Daniel Rees & Guofeng Sun, 2021. "The natural interest rate in China," BIS Working Papers 949, Bank for International Settlements.
    7. Thiago Revil T. Ferreira & Samer Shousha, 2021. "Supply of Sovereign Safe Assets and Global Interest Rates," International Finance Discussion Papers 1315, Board of Governors of the Federal Reserve System (U.S.).
    8. Philippe Andrade & Jordi Gali & Hervé Le Bihan & Julien Matheron, 2021. "Should the ECB Adjust Its Strategy in the Face of a Lower r*?," Working Papers 22-1, Federal Reserve Bank of Boston.
    9. Thomas Nitschka & Shajivan Satkurunathan, 2021. "Habits die hard: implications for bond and stock markets internationally," Working Papers 2021-08, Swiss National Bank.
    10. Brand, Claus & Mazelis, Falk, 2019. "Taylor-rule consistent estimates of the natural rate of interest," Working Paper Series 2257, European Central Bank.
    11. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2022. "The big bang: Stock market capitalization in the long run," Journal of Financial Economics, Elsevier, vol. 145(2), pages 527-552.
    12. Anton Nakov & Roberto M. Billi & Jordi Galí, 2022. "Optimal Monetary Policy with r," Working Papers 1333, Barcelona School of Economics.
    13. Thiago Revil T. Ferreira & Samer Shousha, 2020. "Scarcity of Safe Assets and Global Neutral Interest Rates," International Finance Discussion Papers 1293, Board of Governors of the Federal Reserve System (U.S.).
    14. Carvalho, Carlos & Ferrero, Andrea & Mazin, Felipe & Nechio, Fernanda, 2023. "Demographics and Real Interest Rates Across Countries and Over Time," CEPR Discussion Papers 18616, C.E.P.R. Discussion Papers.
    15. Bruno Feunou & Jean-Sébastien Fontaine, 2021. "Debt-Secular Economic Changes and Bond Yields," Staff Working Papers 21-14, Bank of Canada.
    16. Maximilian Grimm & Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2023. "Loose Monetary Policy and Financial Instability," NBER Working Papers 30958, National Bureau of Economic Research, Inc.
    17. Dario Caldara & Etienne Gagnon & Enrique Martínez García & Christopher J. Neely, 2021. "Monetary Policy and Economic Performance Since the Financial Crisis," Review, Federal Reserve Bank of St. Louis, vol. 103(4), pages 425-460, October.
    18. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2020. "The Expected Return on Risky Assets: International Long-run Evidence," CEPR Discussion Papers 15610, C.E.P.R. Discussion Papers.
    19. Bielecki, Marcin & Brzoza-Brzezina, Michał & Kolasa, Marcin, 2020. "Demographics and the natural interest rate in the euro area," European Economic Review, Elsevier, vol. 129(C).
    20. Yanzhao Liu & Liutang Gong & Jianjian Liu & Chan Wang, 2022. "Dynamic Efficiency in an OLG Model With the Spirit of Capitalism," Annals of Economics and Finance, Society for AEF, vol. 23(2), pages 315-328, November.

    More about this item

    Keywords

    unobserved component model; natural rate of interest; HLW model; Euro area; Germany;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:svrwwp:300653. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/svrgvde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.