IDEAS home Printed from https://ideas.repec.org/a/ecb/ecbbox/202500018.html
   My bibliography  Save this article

Natural rate estimates for the euro area: insights, uncertainties and shortcomings

Author

Listed:
  • Brand, Claus
  • Lisack, Noëmie
  • Mazelis, Falk

Abstract

This box provides an update on estimates of the natural rate of interest, or r*, published in Issue 1, 2024 of the Economic Bulletin. r* is commonly referred to as the real rate of interest that is neither expansionary nor contractionary. Broad trends in r* can be used to gauge economic risks, such as the potential constraint of the lower bound on interest rates. However, estimating r* is fraught with wide-ranging uncertainties and conceptual limitations. These uncertainties stem from model selection, parameter estimation, filter techniques and variation in real-time data. The inherent uncertainty in estimating r* and its conceptual challenges limit its practical use to determine the appropriate stance of monetary policy at a specific point in time. JEL Classification: E52, E43, C54

Suggested Citation

  • Brand, Claus & Lisack, Noëmie & Mazelis, Falk, 2025. "Natural rate estimates for the euro area: insights, uncertainties and shortcomings," Economic Bulletin Boxes, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:ecbbox:2025:0001:8
    Note: 92649
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//press/economic-bulletin/focus/2025/html/ecb.ebbox202501_08~3be5a005f9.en.html
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Neutral or natural real rate of interest;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbbox:2025:0001:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.