Economics Faculty Publications
Title
Measuring the World Natural Rate of Interest
Document Type
Article
Abstract
This article makes the first attempt to estimate the time-varying natural rate jointly with the output gap and trend potential output growth for the world as a whole using a simple unobserved components model broadly following the methodology developed by Laubach, T., and J. Williams ("Measuring the Natural Rate of Interest." Review of Economics and Statistics, 85(4), 2003, 1063-1070). We find that the world natural rate has been trending down for the past few decades. Over a quarter of the variation in the natural rate is accounted for by the trend potential output growth rate. However, the relationship between the world natural interest rate and the world trend growth is modest and not statistically significant. (JEL E4, E52, E32, C32)
Repository Citation
Wynne, Mark A. and Zhang, Ren, "Measuring the World Natural Rate of Interest" (2018). Economics Faculty Publications. 21.
https://scholarworks.bgsu.edu/econ_pub/21
Publication Date
2018
Publication Title
Economic Inquiry
Publisher
Wiley
DOI
https://doi.org/10.1111/ecin.12500
Volume
56
Issue
1
Start Page No.
530
End Page No.
544