The Natural Rate of Interest in a Non-linear DSGE Model

Yasuo Hirose and Takeki Sunakawa

International Journal of Central Banking, 2023, vol. 19, issue 1, 301-340

Abstract: This paper investigates how and to what extent nonlinearities, including the zero lower bound on the nominal interest rate, affect the estimate of the U.S. natural rate of interest in a dynamic stochastic general equilibrium model. The estimated natural rate in a non-linear model is substantially different from that in its linear counterpart after the global financial crisis because of the zero lower bound. Other non-linearities such as price and wage dispersion, from which a linear model abstracts, play a negligible role in identifying the natural rate.

JEL-codes: C32 E31 E43 E52 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Natural Rate of Interest in a Nonlinear DSGE Model (2019)
Working Paper: The natural rate of interest in a nonlinear DSGE model (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2023:q:1:a:6

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