Measuring the World Natural Rate of Interest

Author(s)

Mark A. Wynne
Ren Zhang, Bowling Green State University

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