## Real Equilibrium Interest Rates in the Euro Area

_IMF Working Papers, June 20, 2025_

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## Bibliographic details
- Authors: Robert C. M. Beyer, Luis Brandao Marques
- Published: June 20, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229013086.001

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### Overview and scope
- Title: Real Equilibrium Interest Rates in the Euro Area
- Authors: Robert C. M. Beyer, Luis Brandão-Marques
- Publication type: IMF Working Papers
- Date: June 20, 2025
- Pages: 33
- Volume: 2025
- Issue: 123
- Series: Working Paper No. 2025/123
- DOI: https://doi.org/10.5089/9798229013086.001
- Stock No: WPIEA2025123
- ISBN: 9798229013086
- ISSN: 1018-5941

### Key findings
- Updated estimates of real equilibrium interest rates in the euro area are produced using eight prominent methodologies from the academic literature.
- The methodologies deliver a wide range of estimates, reflecting differences in time horizon and economic complexity.
- By the end of 2024:
  - Shorter-term equilibrium rates mostly exceeded longer-term rates.
  - Foreign spillovers contributed positively to euro area equilibrium rates.
- Estimated alignment of policy:
  - ECB policy rates are broadly aligned with short-run efficient rates.
  - Monetary policy is suggested to have remained restrictive at the end of 2024.

### Methodological notes
- Eight prominent methodologies from academic literature are used; they vary in:
  - Time horizon.
  - Economic complexity.
- High uncertainty and a wide range of estimates imply model uncertainty that must be explicitly addressed when drawing conclusions.

### Evaluation criteria for judgment-based assessment
- A judgment-based assessment of equilibrium rate estimates should be based on three criteria:
  - Conceptual fit.
  - Robustness.
  - Alignment with other economic indicators.

### Policy implications and recommendations
- Because of wide-ranging estimates and model uncertainty:
  - Formulate robust conclusions and policy recommendations that account for model uncertainty.
- Current policy assessment:
  - ECB policy rates broadly match short-run efficient rates.
  - Monetary stance was restrictive at end-2024.

### Subject classifications and keywords
- Subjects: Central bank policy rate, Dynamic stochastic general equilibrium models, Econometric analysis, Financial services, Inflation, Interest rate floor, Monetary policy, Prices, Real interest rates
- Keywords: Central bank policy rate, Dynamic stochastic general equilibrium models, ECB policy rate, Equilibrium Interest Rates, equilibrium rate, Euro Area, Foreign Spillovers, Global, Inflation, Interest rate floor, longer-term rate, Monetary Stance, open-economy model, Real interest rates

*Source: IMF Working Paper — "Real Equilibrium Interest Rates in the Euro Area" (Working Paper No. 2025/123), Robert C. M. Beyer and Luis Brandão-Marques, June 20, 2025; DOI: https://doi.org/10.5089/9798229013086.001*

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_Source: https://www.imf.org/en/publications/wp/issues/2025/06/20/real-equilibrium-interest-rates-in-the-euro-area-567741_