The Natural Real Rate of Interest in the Euro Area
47 Pages Posted: 2 Dec 2003
Date Written: May 2003
Abstract
In this paper, we discuss the consequences of taking into account the variations of the natural real interest rate (rt*) in simple monetary policy rules. We also provide one possible model-based analysis of the level of rt* that has prevailed in the euro area since the early 1970s, and present the implied "real rate gap" as a possible additional indicator to assess the stance of monetary policy.
Keywords: Natural rate of interest; monetary policy; euro area
JEL Classification: E4, E5
Suggested Citation: Suggested Citation
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