Finance Seminar: Jens Christensen, Federal Reserve Bank of San Francisco
Title: The Natural Rate of Interest in the Euro Area: Evidence from Inflation-Indexed Bonds
Info about event
Time
Location
Fuglesangs Allé 4, 8210 Aarhus V, Building 2632(L), Room 242
Organizer
Presenter: Jens Christensen, Federal Reserve Bank of San Francisco
Title: The Natural Rate of Interest in the Euro Area: Evidence from Inflation-Indexed Bonds
Abstract: The natural rate of interest, widely known as r∗t , is a key variable used to judge the stance of monetary policy. We offer a novel euro-area r∗t estimate based on a dynamic term structure model estimated directly on the prices of bonds with cash flows indexed to the euro-area harmonized index of consumer prices with adjustments for bond-specific risk and real term premia. Despite a recent increase, our estimate indicates that the natural rate in the euro area has fallen about 2 percentage points on net since 2002. We also devise a related measure of the stance of monetary policy, which suggests that monetary policy in the euro area was not accommodative at the height of the COVID-19 pandemic.
Host: Martin Møller Andreasen