 Measuring the trend real interest rate in a data-rich environmentBowen Fu Journal of Economic Dynamics and Control, 2023, vol. 147, issue C Abstract: The trend real interest rate is important for monetary policy decision making and understanding the secular decline in interest rates. Many papers have estimated it. However, the uncertainty surrounding these estimates is substantial. Using the US data, we construct a new measure of the trend real interest rate in a data-rich environment using a large time-varying local mean Bayesian autoregression (VAR), where the posterior median of the time-varying local mean of the real interest rate is our proposed measure. This new measure is more precisely estimated and can provide valuable information to policymakers. The width of the 95% credible intervals of our proposed estimates varies from 0.83% to 3.35%. Also, the average of the width of the 95% credible intervals is 1.43%. From our new measure, we find that the trend real interest rate has declined substantially since 1982Q2 and becomes negative after 2010Q1. Keywords: Trend real interest rate; Equilibrium real interest rate; Large Bayesian vector autoregression; Time-varying local mean (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:147:y:2023:i:c:s016518892300012x DOI: 10.1016/j.jedc.2023.104606 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.