Quo vadis rstar

Jean-Francois Mercier

No 11046, Occasional Bulletin of Economic Notes from South African Reserve Bank

Abstract: Economists generally agreed that neutral real interest rates (r*) had declined in the decades preceding the Covid-19 crisis, in both advanced and emerging economies. However, analyses differed as to the drivers of that decline. While past pandemics generally tended to depress neutral rates, policy responses and low mortality among the active population limited the direct impact of Covid-19 on r*, at least in major economies. Beyond Covid-19, trends in other drivers of neutral rates (demographics, potential growth, public debt) suggest that r* should remain low in coming years. However, r* may not be declining further and could even edge up modestly in the short term. That said, the latest supply shocks have increased challenges in measuring short-term changes to r*. Hence, central banks may place less focus on r* in the near term, at least until the current inflation shock has abated.

Date: 2023-06-29
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.resbank.co.za/content/dam/sarb/publica ... r-star-june-2023.pdf Revision (application/pdf)

Related works:
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:rbz:oboens:11046

Access Statistics for this paper

More papers in Occasional Bulletin of Economic Notes from South African Reserve Bank Contact information at EDIRC.
Bibliographic data for series maintained by Jessica VanWyk ().