The Danish Natural Real Rate of Interest and Secular Stagnation, Working Paper no 94, 2015

Authors Pedersen, Jesper
Subject Danish Economy; Economic activity and employment; Models; Other economic analyses
Type Working paper
Year 2015
Published 16 March 2015
Working paper: This paper discusses the natural real rate, why and how it reflects the stance of monetary policy, and what can happen if it turns negative; make monetary policy ineffective, which in a situation with a negative output gap can lead to a long period of low growth - secular stagnation. Denmark as a fixed exchange rate regime vís-a-vís the euro and consequently has tied its policy rate to the policy rate in the euro zone. But it can still be interesting to analyse the stance of monetary policy and use it as input in policy recommendations for fiscal policy and other economic policies. Using this as motivation, the natural real rate is estimated using Danish data...