How useful is the concept of the natural real rate of interest for monetary policy? |
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Authors: | Weber Axel A; Lemke Wolfgang; Worms Andreas |
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Institution: | * Deutsche Bundesbank |
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Abstract: | The natural rate of interest plays a key role in Wicksell'scumulative process as well as in modern monetaryequilibrium models of the business cycle. It constitutes a usefulconcept for the theoretical analysis of the interdependenceof monetary policy and economic fluctuations. However, the usefulnessof this concept for the practice of monetary policy is limited—especiallyowing to the fact that the natural real rate of interest andits law of motion cannot be measured with satisfying precision. |
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Keywords: | Natural real rate of interest Monetary policy Wicksell |
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