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The Evolution of the Natural Rate of Interest – Evidence from the Scandinavian Countries

Hanna Armelius, Martin Solberger (), Erik Spånberg () and Pär Österholm
Additional contact information
Martin Solberger: Department of Statistics, Uppsala University, Postal: Department of Statistics, Uppsala University, 751 20 Uppsala, Sweden, https://www.katalog.uu.se/profile/?id=N8-1026
Erik Spånberg: Department of Statistics, Stockholm University, Postal: Department of Statistics, Stockholm University, 106 91 Stockholm, Sweden

No 2023:8, Working Papers from Örebro University, School of Business

Abstract: In this paper, the natural rate of interest in Denmark, Norway and Sweden are estimated. This is done by augmenting the Laubach and Williams (2003) framework with a dynamic factor model linked to eco-nomic indicators – a modelling choice which allows us to better identify business cycle fluctuations. We estimate the model using Bayesian methods on data ranging from 1990Q1 to 2022Q4. The results indi-cate that the natural rate has declined substantially and in all countries is at a low level at the end of the sample.

Keywords: Monetary policy; Business cycle; Bayesian filter; Dynamic factor model (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2023-04-28
New Economics Papers: this item is included in nep-cba and nep-ets
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Journal Article: The evolution of the natural rate of interest: evidence from the Scandinavian countries (2024) Downloads
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