The natural interest rate in semi-structural unobserved components models

• Applicants: Professor Dr. Tino Berger; Professor Dr. Bernd Kempa
• Subject Area: Statistics and Econometrics
• Term: from 2020 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 437769753

• Final Report Year: 2023

Final Report Abstract

Our project moves along two different avenues of advancing the frontier of scientific knowledge in estimating the natural rate of interest (NRI). We demonstrate that utilizing cross-sectional data within a structural multiple-indicator unobserved components model leads to a substantial reduction in estimation uncertainty and a dramatic improvement in the precision of estimating the NRI. The second avenue of investigation is concerned with the selection and appropriate econometric modeling of the factors determining the NRI. In particular, we highlight the role of macroeconomic uncertainty in the determination of the NRI.

Publications

• Robust estimation of the euro-area natural rate of interest. Working Paper, University of Göttingen.
  Berger, T.; D. Kazakova & B. Kempa
  
• The role of macroeconomic uncertainty in the determination of the natural rate of interest. Economics Letters, 229, 111191.
  Berger, Tino; Kempa, Bernd & Zou, Feina