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An Update on the Neutral Rate of Interest

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Abstract

The neutral rate serves as a benchmark for measuring monetary stimulus and provides a medium- to long-run anchor for the real policy rate. Global neutral rate estimates have been falling over the past few decades. Factors such as population aging, high corporate savings, and low trend productivity growth are likely to continue supporting a low global neutral rate. These global factors as well as domestic factors are exerting downward pres-sure on the Canadian real neutral rate, which is estimated to be between 0.5 to 1.5 per cent. This low neutral rate has important implications for monetary policy and financial stability.

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  • José Dorich & Abeer Reza & Subrata Sarker, 2017. "An Update on the Neutral Rate of Interest," Bank of Canada Review, Bank of Canada, vol. 2017(Autumn), pages 27-41.
    • Handle: RePEc:bca:bcarev:v:2017:y:2017:i:autumn17:p:27-41
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Perceptions of the neutral interest rate
      by Bruno Duarte in EUnomics on 2018-09-17 17:42:36

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    Cited by:

    1. Thomas J Carter & Rhys Mendes & Lawrence L Schembri, 2018. "Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in Canada," RBA Annual Conference Volume (Discontinued), in: John Simon & Maxwell Sutton (ed.),Central Bank Frameworks: Evolution or Revolution?, Reserve Bank of Australia.
    2. Thomas J. Carter & Xin Scott Chen & José Dorich, 2019. "The Neutral Rate in Canada: 2019 Update," Staff Analytical Notes 2019-11, Bank of Canada.
    3. Arto Kovanen, 2019. "Perspectives From the Past for the Federal Reserve¡¯s Monetary Policy and Communication," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(1), pages 31-51, January.
    4. Xin Scott Chen & José Dorich, 2018. "The Neutral Rate in Canada: 2018 Estimates," Staff Analytical Notes 2018-22, Bank of Canada.
    5. Carrillo Julio A. & Elizondo Rocío & Rodríguez-Pérez Cid Alonso & Roldán-Peña Jessica, 2018. "What Determines the Neutral Rate of Interest in an Emerging Economy?," Working Papers 2018-22, Banco de México.
    6. Pang, Ke & Shiamptanis, Christos, 2024. "Is the Bank of Canada concerned about inflation or the state of the economy?," Journal of International Money and Finance, Elsevier, vol. 140(C).

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