Estimating the Natural Rates in a Simple New Keynesian Framework

Arbeitspapier

The time-varying natural rate of interest and output and the implied medium term inflation target for the US economy are estimated over the period 1983-2005. The estimation is conducted within the New-Keynesian framework using Bayesian and Kalman-filter estimation techniques. With the model-consistent estimate of the output gap, we get a small weight on the backward-looking component of the New-Keynesian Phillips curve - similar to what is obtained in studies which use labor share of income as a driver for inflation (e.g., Galì et al., 2001, 2003). The turning points of the business cycle are nevertheless broadly consistent with those of CBO/NBER. We find considerable variation in the natural rate of interest while the inflation target has been close to 2% over the last decade.

Object Details

• ISBN: 978-82-7553-408-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2007/10

Classification and Topics

• Classification: Wirtschaft ; Model Construction and Estimation ; Business Fluctuations; Cycles ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Monetary Policy
• Subject: New-Keynesian model ; natural rate of interest ; natural rate of output ; inflation target

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bjørnland, Hilde C. ; Leitemo, Kai ; Maih, Junior
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/209886
• Last update: 10.03.2025, 11:44 AM CET