The Reliability of Macroeconomic Forecasts Based on Real Interest Rate Gap Estimates in Real Time: An Assessment for the Euro Area
46 Pages Posted: 25 Oct 2010
Date Written: October 1, 2006
Abstract
The real interest rate gap or IRG - the gap between the short term real interest rate and its "natural" level - is a theoretical concept that has attracted much attention in central banks in recent years. This paper aims at clarifying its practical relevance for monetary policy in real time. For this purpose, it provides an empirical assessment of the usefulness of various univariate and multivariate estimates of the real IRG for predicting inflation, real activity and real credit growth in the euro area. The results suggest that the reliability of such indicators for real time policy guidance remains limited.
Keywords: natural rate of interest, monetary policy, forecasting
JEL Classification: C53, E37, E52
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Optimal Supervisory Policies and Depositor-Preference Laws
By Henri Pagès and João A. C. Santos
-
Declining Valuations and Equilibrium Bidding Central Bank Refinancing Operations
By Christian Ewerhart, Nuno Cassola, ...
-
Fiscal Policy in the Transition to Monetary Union: A Structural VAR Model
-
Testing for Zeros in the Spectrum of an Univariate Stationary Process: Part I
-
The Tail Behavior of Stock Returns: Emerging Versus Mature Markets
By Eric Jondeau and Michael Rockinger
-
Inflation and the Markup in the Euro Area
By Catherine Bruneau, Olivier De Bandt, ...
-
Forecasting Inflation in the Euro Area
By Catherine Bruneau, Olivier De Bandt, ...
-
Long-Run Causality, with an Application to International Links between Long-Term Interest Rates
By Catherine Bruneau and Eric Jondeau
-
Assessing GMM Estimates of the Federal Reserve Reaction Function
By Clementine Florens, Eric Jondeau, ...
