The Neutral Interest Rate: A Moving Target

The Week That Was in Europe

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5M ago 18:31

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The neutral rate is relevant for understaning the stance of monetary policy and for the fiscal outlook, as it determines the financing conditions for government debt. We explain how the neutral rate is defined, discuss its economic determinants and provide estimates of how it has changed since the pre-pandemic period. Increased government debt supply appears to have excerted substantial upward pressure on the neutral rate.

We make reference to the following papers:

Thiago Ferreira and Samer Shousha titled “The supply of safe assets and global interest rates” , Journal of International Economics, 2023.

Atif Mian, Ludwig Straub, and Amir Sufi. titled “What explains the decline in r*? Rising income inequality versus demographic shifts.” Proceedings of the Jackson Hole Symposium, 2021.

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#Business News #News #Germany #Klaus Adam & Dirk Schumacher #Dirk Schumacher #Klaus Adam