Finnish paper presents two explanations for eurozone weakness

The Bank of Finland

A paper published in the Bank of Finland’s Economic Review presents two contrasting explanations for the current weak state of demand in the eurozone.

In Two tales of the natural rate of interest, Lauri Vilmi uses two specifications of a “simple semi-structural macroeconomic model” to estimate the eurozone’s long-term natural rate of interest.

In the first estimation, the author says, the key factor is “persistent, recurring negative shocks to the output gap that restrain growth even when

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