The Macroeconomic Consequences of Natural Rate Shocks: An Empirical Investigation / Stephanie Schmitt-Grohé, Martín Uribe.

Format:

Book

Author/Creator:

Schmitt-Grohé, Stephanie.

Contributor:

National Bureau of Economic Research.

Uribe, Martín.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30337.

NBER working paper series no. w30337

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Much of the empirical literature on the natural rate of interest has focused on estimating its path. This paper studies the effects of natural rate shocks on output and inflation. It estimates a semi-structural model inspired by the DSGE literature. A decline in the natural rate is found to have a large negative effect on the trend of output and to be contractionary and deflationary in the short run. When the economy is constrained by the zero lower bound (ZLB), these results are consistent with the secular stagnation hypothesis. However, negative natural rate shocks are found to depress the trend of output even outside of the ZLB, calling for a more general theory of secular stagnation.

Notes:

Print version record

August 2022.