New Advances in the Study of Natural Rate of Interest
The natural rate of interest is a significant indicator for measuring the status of economic resource alloca-tion.In-depth research into the natural rate of interest contributes to understanding macroeconomic trends,identifying monetary policy conditions,assessing changes in market interest rates,and forecasting long-term economic development trends.This paper delves into the forefront of domestic and international literature on the natural rate of interest,compre-hensively examining its primary influencing factors and implications for macroeconomic policymaking.This paper reviews current estimation methodologies and their latest advancements,comparing the strengths and weaknesses of each method.Then,this paper summarizes China's current estimation methods and findings related to the natural rate of interest,fur-ther analyzing China's economic trends and macro policy stance.Firstly,regarding influencing factors,traditional research posits that structural and cyclical elements primarily shape the natural rate of interest.In the long run,structural factors such as economic growth,labor productivity,and demo-graphic shifts dictate its trend.Short-term fluctuations,on the other hand,are primarily governed by the relative balance between investment and savings,with crises like financial meltdowns exerting additional influence.Beyond these tradi-tional factors,pandemics like COVID-19 significantly alter individual behaviors and the supply-demand dynamics of capi-tal.Additionally,climate change and transition policies aimed at mitigating its effects reshape the structure and dynamics of economic and financial systems,thereby impacting the natural rate of interest.Secondly,the natural rate of interest carries significant implications for macroeconomic policymaking.It reflects the cost of capital in an economy devoid of price rigidities,prompting a crucial debate on whether policy rates should be an-chored to and adjusted around the natural rate.Moreover,the post-global financial crisis and COVID-19 era have ushered in an era of low interest rates,with the decline in the natural rate pushing nominal rates perilously close to the zero lower bound,thereby constraining traditional monetary policy instruments.Thirdly,regarding the estimation methodologies,three approaches are common in the macroeconomic realm:time-series methods,state-space models,and macroeconomic models.Time-series methods employ simple filtering or vector autoregression to extract the trend in real interest rates,serving as a proxy for the natural rate of interest.State-space models,more commonly used,link the natural rate to output gaps and inflation through semi-structural models.Macro-economic models are mainly dynamic stochastic general equilibrium(DSGE)models,offering robust foundations but re-lying heavily on assumptions.Fourthly,existing research findings indicate a declining trend in China's natural rate of interest,irrespective of the estimation method employed,policy rate chosen,or financial and demographic factors considered.Technical and demo-graphic factors continue to play pivotal roles in shaping this trend.Key features of current research are as follows.Firstly,climate change emerges as a novel influencing factor and its precise impact on the natural rate of interest remains uncertain.Secondly,before the Federal Reserve's aggressive rate hikes in 2022 to curb inflation,the global landscape was characterized by low or even negative interest rates,prompting studies to focus on the constraining effects of persistently low natural rates of interest on conventional monetary policy space,particularly at the zero lower bound.Thirdly,state-space models and macroeconomic models are the two most uti-lized estimation methods in China,requiring attention to monetary policy settings.Future research topics include but are not limited to the following:(1)estimating the natural rate based on macro-economic models that capture China's unique characteristics;(2)examining the impact of climate change and green fi-nance on China's natural rate of interest estimations;(3)exploring potential factors reversing the declining trend,such as asset bubbles;and(4)analyzing the trajectory of the natural rate of interest in the digital economy era.
Natural Rate of InterestResource AllocationMonetary PolicyEstimation of China's Natural Rate of Interest
万方数据
维普
