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Real-time estimation of the equilibrium real interest rate: Evidence from Japan

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  • Umino, Shingo

Abstract

This study demonstrates quantitatively the degree to which uncertainty originates from the revision of data inherent in the real-time estimation of the Japan's equilibrium real interest rate (ERR). It also presents some attempts to reduce that uncertainty. Results show that markedly high uncertainty results from data revision. A modified model is proposed to estimate a more credible ERR that includes lowered uncertainty with revision-free data. Furthermore, the Bank of Japan, while facing that uncertainty, has made three judgment errors because it did not recognize reliable ERR.

Suggested Citation

  • Umino, Shingo, 2014. "Real-time estimation of the equilibrium real interest rate: Evidence from Japan," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 17-32.
    • Handle: RePEc:eee:ecofin:v:28:y:2014:i:c:p:17-32
    DOI: 10.1016/j.najef.2014.01.001
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    Cited by:

    1. Mark A. Wynne & Ren Zhang, 2018. "Estimating the natural rate of interest in an open economy," Empirical Economics, Springer, vol. 55(3), pages 1291-1318, November.
    2. Marius ACATRINEI & Dan ARMEANU & Carmen Elena DOBROTA, 2018. "Natural Interest Rate for the Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 104-116, September.

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    More about this item

    Keywords

    Equilibrium real interest rate; Real-time estimate; Data revision; TANKAN; Weighted DI;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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