Measuring the Natural Rate of Interest

Thomas Laubach and John Williams

The Review of Economics and Statistics, 2003, vol. 85, issue 4, 1063-1070

Abstract: The natural rate of interest-the real interest rate consistent with output equaling its natural rate and stable inflation-plays a central role in macroeconomic theory and monetary policy. Estimation of the natural rate of interest, however, has received little attention. We apply the Kalman filter to estimate jointly time-varying natural rates of interest and output and trend growth. We find a close link between the natural rate of interest and the trend growth rate, as predicted by theory. Estimates of the natural rate of interest, however, are very imprecise and subject to considerable real-time measurement error. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (765)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465303772815934 link to full text (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Measuring the natural rate of interest (2001)
Working Paper: Measuring the Natural Rate of Interest (2001)
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:tpr:restat:v:85:y:2003:i:4:p:1063-1070

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().