The Mirage of Falling R-stars

Author: Mr. Ales Bulir and Mr. Jan Vlcek

Volume/Issue: Volume 2024 Issue 161

Publication date: July 2024

ISBN: 9798400282966

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats


English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , r-star , zero lower bound , equilibrium real appreciation , Penn effect , HLW framework , open-economy extension , ales Bulfr , Time-Invariant Estimates , HLW estimate , Real interest rates , Real exchange rates , Central bank policy rate , Exchange rates , Exchange rate adjustments , Global

Also of interest

WORKING PAPERS PUBLISHED IN JUNE 2005

WORKING PAPERS PUBLISHED IN JUNE 2004

WORKING PAPERS PUBLISHED IN JUNE 2003

Summary

Was the recent decline in real interest rates driven by a diminishing natural real interest rate, or have we observed a long sequence of shocks that have pushed market rates below the equilibrium level? In this paper we show on a sample of 12 open economies that once we account for equilibrium real exchange rate appreciation/depreciation, the natural real interest rate in the 2000s and 2010s is no longer found to be declining to near or below zero. The explicit inclusion of equilibrium real exchange rate appreciation in the identification of the natural rate is the main deviation from the Laubach-Williams approach. On top of that, we use a full-blown semi-structural model with a monetary policy rule and expectations. Bayesian estimation is used to obtain parameter values for individual countries.