The Natural Rate of Interest and Its Usefulness for Monetary Policy-Reference-Cited by-同舟云学术

The Natural Rate of Interest and Its Usefulness for Monetary Policy

Published:2014-05-01 Issue:5 Volume:104 Page:37-43
ISSN:0002-8282
Container-title:American Economic Review
language:en
Short-container-title:American Economic Review

Author:

Barsky Robert¹,Justiniano Alejandro²,Melosi Leonardo²

Affiliation:

1. Federal Reserve Bank of Chicago, 230 S. LaSalle Street, Chicago, IL 60604, University of Michigan, and NBER (e-mail: )

2. Federal Reserve Bank of Chicago; 230 S. LaSalle Street, Chicago, IL 60604 (e-mail: )

Abstract

We estimate a state-of-the-art DSGE model to study the natural rate of interest in the United States over the last 20 years. The natural rate is highly procyclical, and fell substantially below zero in each of the last three recessions. Although the drop was of comparable magnitude across the three recessions, the decline was considerably more persistent in the Great Recession. We discuss the usefulness and limitations, particularly due to the zero lower bound, of the natural rate for the conduct of monetary policy.

Publisher

American Economic Association

Subject

Economics and Econometrics

Link

https://pubs.aeaweb.org/doi/pdf/10.1257/aer.104.5.37

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