The natural rate of interest in Switzerland

Matthias Burgert, Tobias Cwik, Joséphine Molleyres, Barbara Rudolf and Jörn Tenhofen

No 2025-14, Economic Studies from Swiss National Bank

Abstract: Obtaining reliable estimates of the natural rate of interest, r*, and understanding its drivers is key for assessing long-run trends in real interest rates. In turn, this plays a role in assessing the stance of monetary policy. Against this backdrop, we discuss the evolution of real interest rates in Switzerland and present a portfolio of models used by the Swiss National Bank (SNB) to estimate r* as well as investigate its drivers. Moreover, we discuss the implications of the r* estimates for monetary policy. We find that, consistent with the evolution of real interest rates globally and in Switzerland, all model estimates point to a significant decline in r* since the mid-1980s. Also, r* is lower in Switzerland than abroad. Potential output growth as well as global factors related to the demand for and supply of safe and liquid assets (i.e., the convenience yield) and to demographics (as reflected in the discount factor) appear to be important drivers of the downward trend in r*. However, generally speaking, r* estimates are subject to sizeable model and statistical uncertainty. Concerning policy implications for Switzerland, we argue that while estimates of r* provide an important piece of information for monetary policy, other factors, such as the exchange rate, are also key determinants of monetary conditions for a small open economy such as Switzerland.

Keywords: Natural rate of interest; Demographics; Productivity growth; Monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2025
New Economics Papers: this item is included in nep-fdg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.snb.ch/en/publications/research/econom ... omic_studies_2025_14 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:snb:snbecs:2025-14

Access Statistics for this paper

More papers in Economic Studies from Swiss National Bank Contact information at EDIRC.
Bibliographic data for series maintained by Enzo Rossi ().