Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 14, 2023 erstellt
Beschreibung:
The natural rate of interest is a ubiquitous latent variable in economics and finance. Recent estimates display a declining path during the last three to four decades including, in some cases, negative values. Such declining trend in estimates of the natural rate of interest evinces in semi-structural and dynamic stochastic general equilibrium models, of closed and open economies. However, some time series’ stylized features in the literature raise questions about available estimates. The objective of this paper is to shed a particular light on the possible causes of the challenge faced by empirical estimates of the natural rate of interest. To that end, this study explores the history of economic thought discussing Woodford’s interpretation of Wicksell’s natural rate, and more broadly, of Wicksell’s ‘cumulative process’. It argues that Woodford’s definition of Wicksell’s natural rate of interest is incompatible with Wicksell’s views on it, and that consequently, more attention may need to be paid both to the evolution of the concept of the natural rate of interest in Wicksell’s thinking and to its key differences with von Mises’ business cycle theory. These issues are of both theoretical and policymaking outmost importance with implications not only for economic dynamics and stabilization, but also for the theory of capital and, possibly, income distribution