The Natural Rate of Interest I: Theory

Philipp König and Dmitry Chervyakov

No 108, DIW Roundup: Politik im Fokus from DIW Berlin, German Institute for Economic Research

Abstract: The term natural (or neutral) real interest rate refers to the equilibrium value of the real interest rate. As this equilibrium is usually conceived as a situation where inflationary or deflationary pressures have abated, the natural real interest rate is a key concept for central banks seeking to stabilize the general price level or targeting the rate of inflation. The present roundup provides a brief historical review of this concept and explains the relevance of the natural real rate for monetary policy analysis.

Pages: 6 p.
Date: 2017
New Economics Papers: this item is included in nep-mon
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