2009 Fiscal Year Final Research Report

Measuring the Natural Rate of Interest Rates and Its Implications for Macroeconomic Policies

Research Project

Project/Area Number	19530239
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Single-year Grants
Section	一般
Research Field	Economic policy
Research Institution	Kobe University
Principal Investigator	MIYAO Ryuzo Kobe University, 経済経営研究所, 教授 (40229802)
Project Period (FY)	2007 – 2009
Keywords	自然利子率 / マクロ経済政策 / 時系列分析
Research Abstract	The natural rate of interest is generally defined as the interest rate which is neutral to the economy and does not cause changes in prices. The deviation between real interest rates observed in the market and the natural rate represents a measure of stance of monetary policy. This research makes a comparative empirical analysis on measuring the natural rate of interest in Japan and its implications for macroeconomic policies. Reviewing theoretical concepts and discussing the zero interest rate bound in recent years, we estimate and compare several series based on filtering-based and production function-based approaches. The relevance is evaluated from the view point of policy reaction function. It is found that the estimated series using production-function based approach is most relevant and sensible.