A Neutral Real Interest Rate in the Case of a Small Open Economy: Application to Ukraine

Author:

Grui Anton1,Lepushynskyi Volodymyr1ORCID,Nikolaychuk Sergiy1

Affiliation:

1. National Bank of Ukraine

Abstract

This paper measures a neutral interest rate in Ukraine by means of applying a Kalman filter to a semistructural model with unobserved components. We rely on a medium-term concept of a neutral interest rate, where it is defined as a real interest rate consistent with output at its potential level and inflation at its target level after the effects of all cyclical shocks have disappeared. Under this concept, and accounting for the small open nature of Ukrainian economy, the neutral interest rate is determined by the global economy’s cost of capital and domestic long-term factors that influence risk-premium and changes in the real exchange rate. Conditional on long-term forecasts for output, demographic trends, real exchange rate changes, and risk premium, the neutral rate is projected to decrease gradually from its 2.5% level as of the beginning of 2018 to 2% in real terms, or to 7% in nominal terms under a 5% inflation target. However, in the following years, the gap between the National Bank of Ukraine’s policy rate and the neutral rate should remain positive – reflecting the tight monetary stance needed to ensure stable disinflation.

Publisher

National Bank of Ukraine

Reference44 articles.

1. Anderson, R. G., Buol, J. J., Rasche, R. H. (2004). A Neutral Federal Funds Rate? Monetary Trends.

2. Archibald, J., Hunter, L. (2001). What is the neutral real interest rate, and how can we use it? Reserve Bank of New Zealand Bulletin, 64(3), 15-28. Retrieved from https://www.rbnz.govt.nz/research-and-publications/reserve-bank-bulletin/2001/rbb2001-64-03-02

3. Baksa, D., Felcser, D., Horváth, Á., Norbert Kiss, M., Csaba, K., Balázs, K., Gábor Dániel, S., Katalin, S. (2013). Neutral Interest Rate in Hungary. MNB Bulletin, 8, Special Issue, 7-13. Magyar Nemzeti Bank.

4. Ball, L., Gagnon, J., Honohan, P., Krogstrup, S. (2016). What else can central banks do? Geneva Reports on the World Economy, 18. Geneva: International Center for Monetary and Banking Studies. https://cepr.org/sites/default/files/geneva_reports/GenevaP285.pdf

5. Barsky, R., Justiniano, A., Melosi, L. (2014). The natural rate of interest and its usefulness for monetary policy. American Economic Review, 104(5), 37-43. https://doi.org/10.1257/aer.104.5.37

Cited by 9 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3