## 1. Estimates of the Neutral Rate Based on Consumption Models

## Source details

**Canonical URL:** [1. Estimates of the Neutral Rate Based on Consumption Models](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1484.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1484.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1484.pdf.json)

---

### I. Introduction
- Neutral real interest rate defined as the nominal policy rate (or targeted interest rate) deflated by expected inflation; focus on the neutral “ex-ante” short-term real rate.
- Neutral rate interpreted as invariant to the cycle and to factors that do not alter long-term saving and investment patterns; treated as a slow-moving benchmark.
- Paper objectives:
  - Infer stylized facts about neutral rates across a large sample of emerging markets and identify factors behind their decline.
  - Highlight Brazil’s large decrease in the neutral real interest rate and identify an interval for Brazil’s neutral rate based on structural and econometric models.
  - Assess implications of incorrectly estimating a time-varying neutral rate using a small structural model with a simple monetary policy instrument rule.

### II. Stylized facts about neutral rates in emerging markets
- Trend real policy rates (ex post proxy) declined across most emerging markets between 2002 and 2011.
- Brazil’s trend rate dropped near 500 basis points between 2010 and 2013 compared with the average of the previous 4-year period; Turkey experienced a larger drop (around 800 bps).
- Two principal components explain about 45 percent of the common variation in demeaned real short-term interest rates across the sample:
  - PC1 (“common trend”) accounts for about 1/4 of common variance and shows a declining tendency between 2002–10; broadly stable since 2010.
  - PC2 (“common cycle”) accounts for about 1/5 of variance and is cyclical, declining during 2011–12 and rising during Q2 2013.
- Conclusion: neutral real rates declined substantially, especially between 2002–11; declines reflect both country-specific and common global factors, with both persistent and transient components.

### III. Consumption-based (structural) estimates for Brazil
- Representative-agent CRRA Euler equation approximation yields r* positively related to expected per capita income growth (g) and negatively related to variance var(g), with behavioral parameters β and γ entering directly.
- Brazil calibrations for per capita growth:
  - 2005–2008: 3.5 percent per annum; standard deviation 1.4 percent.
  - 2010–2013: 2.5 percent per annum; standard deviation 2.8 percent.
- Behavioral parameter ranges:
  - Discount factor β in range 0.97 to 0.99.
  - Risk aversion γ in range 1 to 2.
- Results (average across parameters):
  - Basic CRRA utility function (Ramsey):
    - Average 2005–08: 7¼ percent.
    - Average 2010–13: 5¾ percent.
  - CRRA with habit formation:
    - Average 2005–08: 7¼ percent.
    - Average 2010–13: 3½ percent.
- Habit persistence:
  - Habit parameter θ ≈ 0.97 for period 2010–2013; close to one for 2005–2008.
  - Under habit framework, neutral real interest rate ranges between 3 and 7 percent, average 5 percent.

### IV. Econometric estimates for Brazil
- A. Statistical filters
  - Filters applied: Hodrick-Prescott, Ravn-Uhlig, Christiano-Fitzgerald to ex-post real interest rates in a sample of 24 emerging markets.
  - Simple sample average: neutral real rates drop by more than 200 basis points across EMs—from about 2.9 percent (early decade) to approximately ¾ percent (post-global financial crisis).
  - Brazil: filter-based neutral rates declined from average 9¼ percent to average 3½ percent (a 575 basis points decline); Brazil remains highest neutral real rate in sample.
  - Limitations: inability to reliably disentangle persistent vs temporary fluctuations and end-point bias in two-sided filters.
- B. Yield curve models
  - Term premium estimate for Brazil (2006–13): about 140 basis points average, with significant cyclical variation.
  - Example: second half of 2013—trend real short-term rate ≈ 3.4 percent; “excess” term premium ≈ 110 basis points → implied NRIR ≈ 4½ percent.
  - Limitations: need to identify cyclically-neutral periods to anchor average term premium; possible divergence between survey expectations and futures pricing.
- C. State space (Kalman filter) model
  - System: two signal equations (short-term and long-term rates) and two state equations (r* as random walk; term premium as AR(1) with drift).
  - Observables in signal equations: 12-month ahead expected inflation, Brazil’s output gap, U.S. 3-month and 10-year yields, Brazilian 5-year CDS spreads, neutral real rate r*; long-term rate also includes term premium.
  - Kalman-filtered neutral rate: declined over past decade with cyclical variation; ranging between 3 and 5 percent over the last two years of sample.
  - Main determinants: expected inflation, long-term U.S. Treasury yields, Brazil’s CDS spreads.
- D. Fundamentals-based regression models (long-run equilibrium)
  - Regressors: productivity growth; inflation gap; inflation surprise (one-year ahead expected inflation vs actual); sovereign risk (5-year CDS); public indebtedness (net public debt/GDP); financial deepening (domestic credit to private sector/GDP); global 3-month and 10-year U.S. yields.
  - Empirical priors confirmed:
    - Higher private credit/GDP → lower neutral rate.
    - Higher sovereign risk/public indebtedness → lower neutral rate.
    - Higher global rates → positive effect on neutral rate.
    - Better inflation performance → lower neutral rate.
    - Higher productivity growth → higher neutral rate.
  - Quantitative contributions (2005–13 vs 2005–08):
    - Domestic factors identified as main domestic reasons for fall in neutral rate: lower public debt, reduced sovereign risk, increased supply of saving (financial deepening).
    - Lower global interest rates contributed about 200 basis points to the decline in Brazil’s neutral rate during 2010–13 relative to 2005–08.
    - Long-run equilibrium real interest rate estimated between 2½ and 3 percent by mid-2013 (wide CI due to sample and model uncertainty).
- Short-run equilibrium (IS-based) model (including public sector via BNDES lending)
  - Gap equation includes: lagged output gap, world output gap, real interest rate gap (actual minus long-run equilibrium), exchange rate gap, central government consumption gap, BNDES lending gap.
  - Estimated coefficients (with standard errors and significance):
    - Lagged output gap: 0.358 (std. error 0.02)***.
    - World output gap: 0.208 (0.07)***.
    - Interest rate gap: -0.453 (0.14)***.
    - Exchange rate gap: -4.885 (1.55)***.
    - BNDES lending gap: 0.060 (0.03)**.
    - Government consumption gap: 0.006 (0.06) (not significant).
  - Evidence that short-run and long-run equilibrium real rates can diverge substantially; example: both rates met around 4 percent early in 2012, with short-run rate lower than long-run until late 2013.

### V. Small monetary model: scenarios and policy implications
- Model: four-equation rational expectations model (IS curve; Phillips curve; uncovered interest parity and exchange rate dynamics; policy rule). Notation preserved: y, y*, output gap, π, π4, z, z*, ze, rUS, ρ, r*, r**, i, ε shocks.
- Calibration: parameters approximately calibrated to Brazil over 2000Q1–2012Q2; inflation target equals mid-point of BCB’s target range of 4½ percent ± 2 percent.
- Scenario summaries and quantitative outcomes:
  - Scenario 1 (r** = r*): gradual 3½ percentage point decline in r* to 3 percent over eight years, correctly identified by policymakers.
    - Outcome: small negative output gap and slight fall of inflation below target; policy inertia causes sluggish policy rate adjustment.
  - Scenario 2 (policymakers lag beliefs): policymakers believe r* is falling but with a two-year lag (r** > r* initially).
    - Outcome: inadvertent monetary tightening; real interest rate gap r - r* rises about 50 basis points in first year, another 50 in second year; interest rate gap peaks ≈ 110 basis points in third year; modest negative output gap; inflation falls persistently but modestly below target.
  - Scenario 3 (policymakers overestimate decline): policymakers believe r* is falling faster than actual (r** < r* initially).
    - Outcome: policy loosening; first-year interest rate gap declines ≈ 20 basis points; output gap rises modestly; interest rate gap peaks ≈ 130 basis points in fifth year.
- Magnitudes of macro effects are modest:
  - Output gap peaks about -0.5 and +0.5 percentage points in scenarios 2 and 3, respectively.
  - Inflation deviation from target about 0.7 percentage points (in opposite directions) in both mistaken scenarios.
- Policy rule sensitivity:
  - Policymakers who respond aggressively to inflation and output gaps (e.g., γπ=3 and γygap=3) restrict divergence of actual real rate gap r - r* even when r** - r* is large.
  - Policymakers with low weights on gaps implicitly place higher weight on their neutral rate estimate and allow larger real rate gaps.
- Policy implication: when neutral rate uncertainty rises, optimal response is to remain or become more activist—respond more forcefully to inflation and output gaps—so observable outcomes self-correct mistaken neutral-rate estimates.

### VI. Conclusions (key takeaways)
- Multiple empirical and semi-structural techniques indicate neutral rates declined in emerging markets over the past decade; Brazil shows particularly large fall but retains high neutral real rates.
- For Brazil, secular decline in neutral rate linked to transition to inflation targeting since July 1999, higher transparency/accountability, and reduced sovereign risk.
- Econometric results attribute Brazil’s neutral rate decline to global real rates and domestic factors: increased supply of saving (financial deepening), declining public debt, and lower sovereign risk; substantial cyclical variation also present.
- Small-model simulations calibrated for Brazil indicate costs of incorrectly estimating the neutral rate, in isolation, are likely to be low because standard monetary policy instrument rules provide a self-correcting mechanism—activist rules reduce divergence of actual real rates from true neutral rates.
- Main policy risk: shifting to a less activist stance that anchors policy to an estimated neutral rate would amplify the costs of mistakes; best response to neutral rate uncertainty is to maintain or increase sensitivity to inflation and output variations.

*Source: _wp1484*

### 1. Estimates of the Neutral Rate Based on Consumption Models .................................. 11

### 1. Estimates of the Neutral Rate Based on Consumption Models .................................. 11

### Major sections
- 1. Estimates of the Neutral Rate Based on Consumption Models .................................. 11
- 2. Emerging Markets: Estimates of the Ex-Post Neutral Rate From Statistical Filters .. 12
- 3. State Space Estimates of the Neutral Real Interest Rate, 2006–13 ............................. 15
- 4. Determinants of Long-Run Equilibrium Real Interest Rate, 2003–13 ....................... 19
- 5. Determinants of Short-Run Equilibrium Real Interest Rate, 2005–13 ....................... 20

### Figures listed in the content unit
- 1. Emerging Markets: Declines in Neutral Real Interest Rates, 2005–13 ........................ 6
- 2. Emerging Markets: PCA Decomposition of Real Policy Rates, 2002–13 .................... 7
- 3. Filter-based Real Policy Rate and Real Interest Gap, 2003–13 .................................. 13
- 4. Slope of the Yield Curve, 2006–13............................................................................. 14
- 5. Neutral Real Interest Rate Based on State Space Model, 2006–13 ............................ 16
- 6. Determinants of Long-Run Equilibrium Real Interest Rate, 2005–13 ....................... 18
- 7. Inflation Surprise and Inflation Gap, 2005–13 ........................................................... 18
- 8. Short- and Long-Run Equilibrium Real Interest Rates, 2005–13 ............................... 21
- 9. Small Model: Scenarios for Neutral Rates .................................................................. 24
- 10. Falling Neutral Real Interest Rates in a Small Monetary Model: Scenarios .............. 25
- 11. Scenario 3: Actual Real Interest Rate Gaps Under Different Policy Rules  ............... 26

*Source: _wp1484 - 1. Estimates of the Neutral Rate Based on Consumption Models .................................. 11*

### References .............................................................................................................

### _wp1484 - References .............................................................................................................

### I. Introduction
- Neutral real interest rate defined as the nominal policy rate (or targeted interest rate) deflated by expected inflation; focus on the neutral “ex-ante” short-term real rate.
- Neutral rate interpreted as invariant to the cycle and to factors that do not alter long-term saving and investment patterns; treated as a slow-moving benchmark.
- Paper objectives:
  - Infer stylized facts about neutral rates across a large sample of emerging markets and identify factors behind their decline.
  - Highlight Brazil’s large decrease in the neutral real interest rate and identify an interval for Brazil’s neutral rate based on structural and econometric models.
  - Assess implications of incorrectly estimating a time-varying neutral rate using a small structural model with a simple monetary policy instrument rule.

### II. Stylized facts about neutral rates in emerging markets
- Trend real policy rates (ex post proxy) declined across most emerging markets between 2002 and 2011.
- Brazil’s trend rate dropped near 500 basis points between 2010 and 2013 compared with the average of the previous 4-year period; Turkey experienced a larger drop (around 800 bps).
- Two principal components explain about 45 percent of the common variation in demeaned real short-term interest rates across the sample:
  - PC1 (“common trend”) accounts for about 1/4 of common variance and shows a declining tendency between 2002–10; broadly stable since 2010.
  - PC2 (“common cycle”) accounts for about 1/5 of variance and is cyclical, declining during 2011–12 and rising during Q2 2013.
- Conclusion: neutral real rates declined substantially, especially between 2002–11; declines reflect both country-specific and common global factors, with both persistent and transient components.

### III. Brief literature review
- Historical and methodological context:
  - Wicksell (1898) theoretical definition.
  - Laubach and Williams (2003) popularized Kalman filter estimates.
  - Early U.S. estimates: Bonfim (1997, 2001), Kozicki and Tinsley (2001), Tao (2005).
  - Applications to other countries: Basdevant et al. (2004), Bernhardsen and Gerdrup (2007).
- Brazil-specific literature:
  - Miranda and Muinhos (2003), Muinhos and Nakane (2006), Neto and Portugal (2009), Perrelli (2012).
  - Explanations for high Brazilian rates: jurisdictional uncertainty (Arida, Bacha, Resende, 2005; Gonçalves, Holland, Spacov, 2007; Bacha, Holland, Gonçalves, 2009), public indebtedness (Barbosa, 2006), low domestic savings (Segura-Ubiergo, 2012).

### IV. Structural estimates of Brazil’s neutral real interest rate (consumption-based calibrations)
- Representative-agent CRRA Euler equation approximation yields relation:
  - r* positively related to expected per capita income growth (g) and negatively related to variance var(g), with behavioral parameters β and γ entering directly.
- Brazil calibrations:
  - Per capita growth:
    - 2005–2008: 3.5 percent per annum; standard deviation 1.4 percent.
    - 2010–2013: 2.5 percent per annum; standard deviation 2.8 percent.
  - Discount factor β used in range 0.97 to 0.99.
  - Risk aversion γ used in range 1 to 2.
- Results (average across parameters):
  - Basic CRRA utility function (Ramsey):
    - Average 2005–08: 7¼ percent.
    - Average 2010–13: 5¾ percent.
  - CRRA with habit formation:
    - Average 2005–08: 7¼ percent.
    - Average 2010–13: 3½ percent.
- Habit persistence calibration:
  - Habit parameter θ ≈ 0.97 for period 2010–2013; close to one for 2005–2008.
  - Under habit framework, neutral real interest rate ranges between 3 and 7 percent, average 5 percent.

### V. Econometric estimates of Brazil’s neutral rate
A. Statistical filters
- Filters applied: Hodrick-Prescott, Ravn-Uhlig, Christiano-Fitzgerald to ex-post real interest rates in a sample of 24 emerging markets.
- Simple sample average: neutral real rates drop by more than 200 basis points across EMs—from about 2.9 percent (early decade) to approximately ¾ percent (post-global financial crisis).
- Brazil: filter-based neutral rates declined from average 9¼ percent to average 3½ percent (a 575 basis points decline); Brazil remains highest neutral real rate in sample.
- Limitations: inability to reliably disentangle persistent vs temporary fluctuations and end-point bias in two-sided filters.

B. Yield curve models
- Term premium estimate for Brazil (2006–13): about 140 basis points average, with significant cyclical variation.
- Example: second half of 2013—trend real short-term rate ≈ 3.4 percent; “excess” term premium ≈ 110 basis points → implied NRIR ≈ 4½ percent.
- Limitations: need to identify cyclically-neutral periods to anchor average term premium; possible divergence between survey expectations and futures pricing.

C. State space (Kalman filter) model for Brazil
- System: two signal equations (short-term and long-term rates) and two state equations (r* as random walk; term premium as AR(1) with drift).
- Observables in signal equations: 12-month ahead expected inflation, Brazil’s output gap, U.S. 3-month and 10-year yields, Brazilian 5-year CDS spreads, neutral real rate r*; long-term rate also includes term premium.
- Kalman-filtered neutral rate: declined over past decade with cyclical variation; ranging between 3 and 5 percent over the last two years of sample.
- Main determinants: expected inflation, long-term U.S. Treasury yields, Brazil’s CDS spreads.

D. Fundamentals-based regression models
- Long-run equilibrium real interest rate regressors: productivity growth; inflation gap; inflation surprise (one-year ahead expected inflation vs actual); sovereign risk (5-year CDS); public indebtedness (net public debt/GDP); financial deepening (domestic credit to private sector/GDP); global 3-month and 10-year U.S. yields.
- Empirical priors confirmed: higher private credit/GDP → lower neutral rate; higher sovereign risk/public indebtedness → lower neutral rate; higher global rates → positive effect; better inflation performance → lower neutral rate; higher productivity growth → higher neutral rate.
- Quantitative contributions (2005–13 vs 2005–08):
  - Domestic factors identified as main domestic reasons for fall in neutral rate: lower public debt, reduced sovereign risk, increased supply of saving (financial deepening).
  - Lower global interest rates contributed about 200 basis points to the decline in Brazil’s neutral rate during 2010–13 relative to 2005–08.
  - Long-run equilibrium real interest rate estimated between 2½ and 3 percent by mid-2013 (wide CI due to sample and model uncertainty).

- Short-run equilibrium (IS-based) model (novel inclusion of public sector via BNDES lending):
  - Gap equation includes: lagged output gap, world output gap, real interest rate gap (actual minus long-run equilibrium), exchange rate gap, central government consumption gap, BNDES lending gap.
  - Estimated coefficients:
    - Lagged output gap: 0.358 (std. error 0.02)***.
    - World output gap: 0.208 (0.07)***.
    - Interest rate gap: -0.453 (0.14)***.
    - Exchange rate gap: -4.885 (1.55)***.
    - BNDES lending gap: 0.060 (0.03)**.
    - Government consumption gap: 0.006 (0.06) (not significant).
  - Evidence that short-run and long-run equilibrium real rates can diverge substantially; example: both rates met around 4 percent early in 2012, with short-run rate lower than long-run until late 2013.

### VI. Insights from a small monetary model (policy implications and scenarios)
- Model setup: four-equation rational expectations model (IS curve; Phillips curve; uncovered interest parity and exchange rate dynamics; policy rule).
- Key variables and definitions preserved exactly as in model description: y, y*, output gap, π, π4, z, z*, ze, rUS, ρ, r*, r**, i, ε shocks.
- Calibration: parameters approximately calibrated to Brazil over 2000Q1–2012Q2; inflation target equals mid-point of BCB’s target range of 4½ percent ± 2 percent.
- Scenarios simulated:
  1. Scenario 1 (r** = r*): gradual 3½ percentage point decline in r* to 3 percent over eight years, correctly identified by policymakers.
     - Outcome: small negative output gap and slight fall of inflation below target; policy inertia causes sluggish policy rate adjustment.
  2. Scenario 2 (policymakers lag beliefs): policymakers believe r* is falling but with a two-year lag (r** > r* initially).
     - Outcome: inadvertent monetary tightening; real interest rate gap r - r* rises about 50 basis points in first year, another 50 in second year; interest rate gap peaks ≈ 110 basis points in third year; modest negative output gap; inflation falls persistently but modestly below target.
  3. Scenario 3 (policymakers overestimate decline): policymakers believe r* is falling faster than actual (r** < r* initially).
     - Outcome: policy loosening; first-year interest rate gap declines ≈ 20 basis points; output gap rises modestly; interest rate gap peaks ≈ 130 basis points in fifth year.
- Magnitudes of macro effects are modest:
  - Output gap peaks about -0.5 and +0.5 percentage points in scenarios 2 and 3, respectively.
  - Inflation deviation from target about 0.7 percentage points (in opposite directions) in both mistaken scenarios.
- Policy rule sensitivity matters:
  - Policymakers who respond aggressively to inflation and output gaps (e.g., γπ=3 and γygap=3) restrict divergence of actual real rate gap r - r* even when r** - r* is large.
  - Policymakers with low weights on gaps implicitly place higher weight on their neutral rate estimate and allow larger real rate gaps.
- Policy implication: when neutral rate uncertainty rises, optimal response is to remain or become more activist—respond more forcefully to inflation and output gaps—so observable outcomes self-correct mistaken neutral-rate estimates.

### VII. Concluding remarks
- Multiple empirical and semi-structural techniques indicate neutral rates declined in emerging markets over the past decade; Brazil shows particularly large fall but retains high neutral real rates.
- For Brazil, secular decline in neutral rate linked to transition to inflation targeting since July 1999, higher transparency/accountability, and reduced sovereign risk.
- Econometric results attribute Brazil’s neutral rate decline to global real rates and domestic factors: increased supply of saving (financial deepening), declining public debt, and lower sovereign risk; substantial cyclical variation also present.
- Small-model simulations calibrated for Brazil indicate costs of incorrectly estimating the neutral rate, in isolation, are likely to be low because standard monetary policy instrument rules provide a self-correcting mechanism—activist rules reduce divergence of actual real rates from true neutral rates.
- Main policy risk: shifting to a less activist stance that anchors policy to an estimated neutral rate would amplify the costs of mistakes; best response to neutral rate uncertainty is to maintain or increase sensitivity to inflation and output variations.

*Source: _wp1484 - References .............................................................................................................*

### REFERENCES

### _wp1484 - REFERENCES

### Neutral / Natural / Equilibrium Real Interest Rate
- Archibald, Joanne and Leni Hunter, 2001, “What is the Neutral Real Interest Rate, and How Can We Use It?” Reserve Bank of New Zealand Bulletin, Vol. 64, pp. 15-28.
- Basdevant, Olivier, Nils Björksten, and Özer Karagedikli (2004), “Estimating a Time Varying Neutral Real Interest Rate for New Zealand,” Reserve Bank of New Zealand Discussion Paper 2004/01.
- Bernhardsen, Tom , and Karsten Gerdrup, 2007, “The Neutral Real Interest Rate,” Norges Bank Economic Bulletin 2, Vol. 78, pp. 52-64.
- Laubach, T., and J. Williams, 2003, “Measuring the Natural Rate of Interest,” The Review of Economics and Statistics, Vol. 83, p.p. 218–231.
- Magud, Nicolas E., and Evridiki Tsounta, 2012, “To Cut or Not to Cut? That is the (Central Bank’s) Question—In Search of the Neutral Interest Rate in Latin America,” IMF Working Paper 12/243.
- Perrelli, Roberto, 2012, “The Neutral Real Interest Rate in Brazil,” Brazil––Article IV Staff Report, IMF Country Report No. 12/191 (Washington: International Monetary Fund).
- Wu, Tao, 2005, “Estimating the ‘Neutral’ Real Interest Rate in Real Time,” Federal Reserve Bank of San Francisco Economic Letter, Number 2005–27.
- Giammarioli, Nicola, and Natacha Valla (2004), “The natural real interest rate and monetary policy: a review,” Journal of Policy Modeling n. 26, 641–660.

### Brazil and Latin America: interest rates, dollarization, and policy
- Arida, P., E. L. Bacha, and A. L. Resende, 2005, “Credit, Interest, and Jurisdictional Uncertainty: Conjectures on the Case of Brazil,” in Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003, edited by F. Giavazzi, I. Goldfajn, and S. Herrera. Cambridge, MA: MIT Press.
- Bacha. E. L., M. Holland, and F. M. Gonçalves, 2009, “A Panel-Data Analysis of Interest Rates and Dollarization in Brazil,” Revista Brasileira de Economia, Vol. 63, n. 4, pp. 341–360.
- Barbosa, F. de H., 2006, “The Contagion Effect of Public Debt on Monetary Policy: The Brazilian Experience,” Brazilian Journal of Political Economy, Vol. 26, n. 2, pp. 231-238.
- Goldfajn, I., and A. Bicalho, 2011, “A Longa Travessia para a Normalidade: Os Juros Reais no Brasil,” in Novos Dilemas da Política Econômica - Ensaios em Homenagem a Dionisio Dias Carneiro, edited by E. L. Bacha e M. B. de Bolle. Rio de Janeiro: Grupo Editorial Nacional.
- Gonçalves, F. M., M. Holland, and A. D. Spacov, 2007, “Can Jurisdictional Uncertainty and Capital Controls Explain the High Level of Real Interest Rates in Brazil? Evidence from Panel Data,” Revista Brasileira de Economia, Vol. 61, n. 1, p.p. 49–75.
- Miranda, P., and M. Muinhos, 2003, “A Taxa de Juros de Equilíbrio: Uma Abordagem Múltipla,” Brazilian Central Bank Working Paper n. 66.
- Muinhos, M., and M. Nakane, 2006, “Comparing Equilibrium Real Interest Rates: Different Approaches to Understand Brazilian Rates,” Brazilian Central Bank Working Paper n. 101.
- Neto, P. C. F. de B., and M. S. Portugal, 2009, “The Natural Rate of Interest in Brazil between 1999 and 2005,” Revista Brasileira de Economia, Vol. 63, n. 2, pp. 103–118.
- Perrelli, Roberto, Shaun K. Roache, and Carlos Góes, 2014, “The Impact of the Tapering Tantrum on the Slope of the Yield Curve of Emerging Market Economies,” IMF Working Paper (forthcoming).
- Roache, Shaun K., 2014, “Inflation Persistence in Brazil—A Cross Country Comparison,” IMF Working Paper 14/55.
- Segura-Ubiergo, Alex (2012), “The Puzzle of Brazil's High Interest Rates,” IMF Working Paper 12/62.
- Magud, Nicolas E., and Evridiki Tsounta, 2012, “To Cut or Not to Cut? That is the (Central Bank’s) Question—In Search of the Neutral Interest Rate in Latin America,” IMF Working Paper 12/243.
- Tovar, Camilo E., Mercedes Garcia-Escribano, and Mercedes Vera Martin (2012), “Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America,” IMF Working Paper 12/142.
- Pereira da Silva, Luiz Awazu, and Ricardo Eyer Harris, 2012, “Sailing Through the Global Financial Storm: Brazil’s Recent Experience with Monetary and Macroprudential Policies to Lean Against the Financial Cycle and Deal With Systemic Risks,” Brazilian Central Bank Working Paper n. 290.
- Fuentes S., Rodrigo, and Fabián Gredig U. (2008), “La Tasa de Interés Neutral: Estimaciones para Chile,” Economía Chilena, Vol. 11, n. 2.

### Monetary policy rules, models, and robustness
- Berg, Andrew, Philippe Karam, and Douglas Laxton, 2006, “A Practical Model-Based Approach to Monetary Policy Analysis—Overview,” IMF Working Paper 06/80.
- Orphanides, A., 2002, “Monetary-Policy Rules and the Great Inflation,” American Economic Review, Vol. 92, No. 2, pp. 115-120.
- __________ and J. C. Williams, 2007, “Robust Monetary Policy with Imperfect Knowledge,” Journal of Monetary Economics, 54, 1406-1435.
- Rudebusch, G. D., and L. E. O. Svensson, 1999, “Policy Rules for Inflation Targeting”, in Monetary Policy Rules, edited by J. B. Taylor. Chicago: University of Chicago Press.
- Taylor, John B., 1993, “Discretion versus Policy Rules in Practice,” Carnegie Rochester Conference Series on Public Policy 39, 195–214.
- ____________, and John C. Willliams, 2010, “Simple and Robust Rules for Monetary Policy,” in Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 15, pp. 829-859 (Elsevier).
- Sack, Brian, and Volker Wieland, 2000, “Interest-Rate Smoothing and Optimal Monetary Policy: A Review of Recent Empirical Evidence,” Journal of Economics and Business vol. 52, n. 1-2, pp. 205-228.
- Smets, Frank, 2002, “Output Gap Uncertainty: Does it Matter for the Taylor Rule?” Empirical Economics, 27, pp. 113-129.
- Söderlind, Paul, 1999, “Solution and Estimation of RE Macromodels with Optimal Policy,” European Economic Review, 43, pp. 813-823.
- Bomfim, Antulio, 1997, “The Equilibrium Fed Funds Rate and the Indicator Properties of Term-Structure Spreads,” Economic Inquiry 35:4 (1997), 830–846.
- Bomfim, Antulio, 2001, “Measuring Equilibrium Real Interest Rates: What Can We Learn from Yields on Indexed Bonds?” Board of Governors of the Federal Reserve System FEDS 2001-53.
- Berg, Andrew, Philippe Karam, and Douglas Laxton, 2006, “A Practical Model-Based Approach to Monetary Policy Analysis—Overview,” IMF Working Paper 06/80.

### Term structure, yields, and safe assets
- Kozicki, S., and P. A. Tinsley, “Shifting Endpoints in the Term Structure of Interest Rates,” Journal of Monetary Economics 47:3, 613–652.
- Gourinchas, Pierre-Olivier, and Olivier Jeanne, 2012, “Global safe assets,” BIS Working Papers n. 399.
- Perrelli, Roberto, Shaun K. Roache, and Carlos Góes, 2014, “The Impact of the Tapering Tantrum on the Slope of the Yield Curve of Emerging Market Economies,” IMF Working Paper (forthcoming).
- Bomfim, Antulio, 1997, “The Equilibrium Fed Funds Rate and the Indicator Properties of Term-Structure Spreads,” Economic Inquiry 35:4 (1997), 830–846.

### Consumption preferences, utility estimation, and empirical methods
- Fuhrer, J. C. (2000): “Habit Formation in Consumption and Its Implications for Monetary-Policy Models”, American Economic Review, Vol. 90, no. 3 June.
- Issler, J. V., and N. S. Piqueira, 2000, “Estimating Relative Risk Aversion, the Discount Rate, and the Intertemporal Elasticity of Substitution in Consumption for Brazil Using Three Types of Utility Function,” Brazilian Review of Econometrics, v.20, n. 2, pp. 201–239.
- Erhmann, Michael, and Frank Smets, 2003, “Uncertain Potential Output: Implications for Monetary Policy,” Journal of Economic Dynamics and Control, 27, pp. 1611-1638.
- Kozicki, S., and P. A. Tinsley, “Shifting Endpoints in the Term Structure of Interest Rates,” Journal of Monetary Economics 47:3, 613–652.
- Smets, Frank, 2002, “Output Gap Uncertainty: Does it Matter for the Taylor Rule?” Empirical Economics, 27, pp. 113-129.

### Foundational and historical works
- Wicksell, Knut, 1898, Interest and Prices, translated by R. F. Kahn in 1936 (New York: Sentry Press).
- Taylor, John B., 1993, “Discretion versus Policy Rules in Practice,” Carnegie Rochester Conference Series on Public Policy 39, 195–214.
- Rudebusch, G. D., and L. E. O. Svensson, 1999, “Policy Rules for Inflation Targeting”, in Monetary Policy Rules, edited by J. B. Taylor. Chicago: University of Chicago Press.

*Source: _wp1484 - REFERENCES*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1484.pdf_