Paper offers new method for measuring natural rate
Authors say use of natural experiment leads to much smaller errors
Economists have developed a new method for measuring the natural rate of interest, exploiting a natural experiment in the form of property lease negotiations.
The natural rate is critical to central banks in judging the restrictiveness of their monetary policy stance, as well as for understanding structural shifts in the economy. But Verónica Bäcker-Peral, Jonathon Hazell and Atif Mian note previous methods for estimating the rate – notably that of Holston, Laubach and Williams – are
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