IMF paper measures the natural rate of interest


An International Monetary Fund paper published on January 11 says central banks that cannot observe the natural rate of interest can instead use money demand, the observed output gap and inflation as a proxy measure.

The paper's authors, Helge Berger and Henning Weber, employ a conventional microfounded monetary model to measure the natural interest rate. While this rate is an important benchmark of the monetary policy stance, they say it is difficult to measure.

The authors show the natural

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