Equilibrium Real Interest Rates – concepts, current and future drivers: New insights and policy implications

Diesen Termin in meinem Kalender speichern

A secular decline in r* was one of the key drivers of the strategy reviews carried out by the ECB and the FED in the years 2019-2021. While we have seen an increase in r* after the multiple shocks that started with the Covid crisis, it is not clear whether the secular decline in r* may have stopped or reversed or whether this increase is only temporary. This is an important question in the short-term because it will give an indication of how much central banks have to tighten to reign on inflation. In the medium and long-term it is important because it will influence the type of instruments that central banks should have in their toolkits if we were again approaching the effective lower bound on interest rates.

This workshop calls for a broader view of “equilibrium interest rate”. It explores various concepts of the natural rate along different dimensions, such as time (short versus long-run horizon, short-term versus long-term rates) or sectoral (public debt vs. private capital). Moreover, it addresses the novel concept of the financial (in)stability rate of interest. In addition to a comparative and careful juxtaposition and appraisal of the various concepts, the workshop seeks to answer the following questions: (1) What are past and future trends in the level of these various “equilibrium rates”? (2) Which “equilibrium rate of interest” may be most informative for which policy purpose?

This workshop brings together the latest theoretical and empirical research on this topic, which is central for both monetary policy and longer-term structural policies. Presentations aim to be accessible to audiences active in the policy, advisory and investment community, to allow immediate insights for policy and investment decisions.



Welcome and opening remarks


Living with R* or Working on R*
Robert Holzmann, Governor, OeNB


Session 1: Conceptual challenges: which r* to look at for what purpose? 


Keynote lecture
Ricardo Reis, A. W. Phillips Professor of Economics, LSE I SUERF Fellow

Stefano Neri, Head, Economic Outlook and Monetary Policy Directorate, Banca d’Italia I SUERF

Adrian Penalver, Deputy Director, Monetary and Financial Studies Directorate, Banque de France




Session 2: Endogeneity of r* to monetary policy  


Chair: Deniz Igan, Head of Macroeconomic Analysis, BIS I SUERF Vice-President

The natural rate of interest through a hall of mirrors
Phurichai Rungcharoenkitkul, Director , Monetary Policy Strategy Office, Bank of Thailand
Co-author: Fabian Winkler, Federal Reserve Board

Star struck: Monetary Policy and the Neutral Real Rate
Garo Garabedian, Senior Economist, Monetary Policy Division, Central Bank of Ireland

The Financial (In)Stability Real Interest Rate, R**
Gianluca Benigno, Professor of Economics, University of Lausanne
co-authors: Ozge Akinci, Marco Del Negro (Fed NY), Albert Queralto (Fed Washington)




Session 3: The long view: looking back and ahead and implications for monetary policy


Chair: Ernest Gnan, Secretary General, SUERF

The effects of climate change on the natural rate of interest
Francesco Paolo Mongelli, Senior Adviser, DG Monetary Policy, ECB I Honorary Professor, Goethe University Frankfurt
co-authors: Jan Willem van den End, De Nederlandsche Bank, Wolfgang Pointner, OeNB

Long-run trends in long-maturity real rates 1311-2021
Paul Schmelzing, Assistant Prof. of Finance, Boston College I Research Fellow, Hoover Institution Stanford
co-authors: Kenneth S. Rogoff (Harvard University), Barbara Rossi (Universitat Pompeu Fabra)

Housing and the secular decline in real interest rates
Markus Knell, Senior Expert, Oesterreichische Nationalbank

Secular drivers of the natural rate of interest: Looking ahead
Josef Platzer, Economist, International Monetary Fund (IMF)
Co-author: Marcel Peruffo (IMF)

15.00 End

Thursday, December 7, 2023

Oesterreichische Nationalbank
Otto-Wagner-Platz 3
1090 Vienna
and online via Webex

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