## The Mirage of Falling R-stars

_IMF Working Papers, July 26, 2024_

## Source details

**Canonical URL:** [The Mirage of Falling R-stars](https://www.imf.org/en/publications/wp/issues/2024/07/26/the-mirage-of-falling-r-stars-552122)

## Other formats

- [Markdown version](/en/publications/wp/issues/2024/07/26/the-mirage-of-falling-r-stars-552122/index.md)
- [Structured JSON version](/en/publications/wp/issues/2024/07/26/the-mirage-of-falling-r-stars-552122/index.json)
- [Bundle manifest](/en/publications/wp/issues/2024/07/26/the-mirage-of-falling-r-stars-552122/bundle-manifest.json)

## Bibliographic details
- Authors: Aleš Bulíř, Jan Vlcek
- Published: July 26, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400282966.001

---

### Summary and main finding
- Research question: Was the recent decline in real interest rates driven by a diminishing natural real interest rate, or by a long sequence of shocks that have pushed market rates below the equilibrium level?
- Main finding: On a sample of 12 open economies, once equilibrium real exchange rate appreciation/depreciation is accounted for, the natural real interest rate in the 2000s and 2010s is no longer found to be declining to near or below zero.
- Key deviation from prior work: The explicit inclusion of equilibrium real exchange rate appreciation in the identification of the natural rate is the main deviation from the Laubach-Williams approach.

### Methodology and model
- Model features:
  - A full-blown semi-structural model with a monetary policy rule and expectations.
  - Explicit identification of equilibrium real exchange rate appreciation/depreciation.
- Estimation approach:
  - Bayesian estimation is used to obtain parameter values for individual countries.
- Sample:
  - 12 open economies.

### Subjects and keywords (as listed)
- Subject: Central bank policy rate, Exchange rate adjustments, Exchange rates, Financial services, Foreign exchange, Real exchange rates, Real interest rates
- Keywords: ales Bulfr, Central bank policy rate, equilibrium real appreciation, Exchange rate adjustments, Exchange rates, Global, HLW estimate, HLW framework, open-economy extension, Penn effect, r-star, Real exchange rates, Real interest rates, Time-Invariant Estimates, zero lower bound

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2024/english/wpiea2024161-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2024/english/wpiea2024161-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2024/07/26/the-mirage-of-falling-r-stars-552122_