The Natural Rate of Interest in a Nonlinear DSGE Model

Yasuo Hirose and Takeki Sunakawa

No e128, Working Papers from Tokyo Center for Economic Research

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 natural rate of interest in a dynamic stochastic general equilibrium model with sticky prices and wages. The estimated natural rate of interest in a nonlinear model is substantially different from that in its linear counterpart because of a contractionary effect of the zero lower bound. Price and wage dispersion, from which a linear model abstracts, play a minor role in identifying the natural rate.

Pages: 34 pages
Date: 2019-02
New Economics Papers: this item is included in nep-dge and nep-mon
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Natural Rate of Interest in a Non-linear DSGE Model (2023)
Working Paper: The natural rate of interest in a nonlinear DSGE model (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tcr:wpaper:e128

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