A1045
Title: Do Monetary Policy Shocks Affect the Neutral Rate of Interest?
Authors: Rodrigo Sekkel - Bank of Canada (Canada)
Luis Uzeda - Bank of Canada (Canada)
Danilo Leiva-Leon - European Central Bank (Germany) [presenting]
Abstract: This paper introduces an econometric framework to jointly estimate the neutral rate of interest and evaluate the impact of monetary policy shocks on its dynamics. The model employs a time-varying parameter Bayesian VAR with stochastic volatility, allowing structural shocks identified within the model to influence its evolving parameters. The neutral rate is modeled as a component of the long-run Fisher equation, providing a nuanced perspective on its interaction with monetary policy. Using an instrumental variables-based identification strategy, the findings reveal that monetary policy shocks exert a small but persistent effect on the real neutral rate of interest.
