 The natural rate of interest: information derived from a shadow rate modelApplied Economics, 2020, vol. 52, issue 47, 5129-5138 Abstract: The study proposes an estimation method of the natural rate of interest based on the shadow rate term structure of interest rates model and using information from nominal yields data. For the purpose of comparison and robustness check, different samples for the estimation of the natural rate of interest – three for the euro area and two for the US – are considered. The estimates based on all considered samples show a downturn trend in the estimated natural rates of interest for the euro area. However, since the beginning of 2013, this downward trend has levelled off. Compared to the results obtained by affine models, the shadow rate model produces lower estimates of the natural rates of interest. In order to demonstrate the use of the natural rate of interest, we employ the estimated series of the natural rate of interest in the balance-approach version of the Taylor rule. The results imply that, at the end of the sample in July 2017, Taylor rule-suggested policy rates were in line with the actual ECB policy rates. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:52:y:2020:i:47:p:5129-5138 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2020.1757029 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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