Estimating equilibrium real interest rates in real-time
Todd Clark and
Sharon Kozicki ()
No 2004,32, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank
We use a range of simple models and 22 years of real-time data vintages for the U.S. to assess the difficulties of estimating the equilibrium real interest rate in real time. Model specifications differ according to whether the time-varying equilibrium real rate is linked to trend growth, and whether potential output and growth are defined by the CBO?s estimates or treated as unobserved variables. Our results reveal a high degree of specification uncertainty, an important one-sided filtering problem, and considerable imprecision due to data uncertainty. Also, the link between trend growth and the equilibrium real rate is shown to be quite weak. Overall, we conclude that statistical estimates of the equilibrium real rate will be difficult to use reliably in practical policy applications.
Keywords: real-time-data; time-varying parameter; Kalman filter; trend growth (search for similar items in EconPapers)
JEL-codes: C3 C5 E4 E52 (search for similar items in EconPapers)
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Journal Article: Estimating equilibrium real interest rates in real time (2005)
Working Paper: Estimating equilibrium real interest rates in real time (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:2298
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