The Post-Pandemic r*

Katie Baker, Logan Casey, Marco Del Negro, Aidan Gleich and Ramya Nallamotu

No 20230809, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The debate about the natural rate of interest, or r*, sometimes overlooks the point that there is an entire term structure of r* measures, with short-run estimates capturing current economic conditions and long-run estimates capturing more secular factors. The whole term structure of r* matters for policy: shorter run measures are relevant for gauging how restrictive or expansionary current policy is, while longer run measures are relevant when assessing terminal rates. This two-post series covers the evolution of both in the aftermath of the pandemic, with today’s post focusing especially on long-run measures and tomorrow’s post on short-run r*.

Keywords: r*; r-star; post-pandemic; Dynamic Stochastic General Equilibrium (DSGE) models (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2023-08-09
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mon
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