Publication:
Neutral Real Interest Rates in Inflation Targeting Emerging and Developing Economies

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dc.contributor.authorRuch, Franz Ulrich
dc.date.accessioned2021-06-24T15:52:49Z
dc.date.available2021-06-24T15:52:49Z
dc.date.issued2021-06
dc.description.abstractWith close to 30 emerging market and developing economies (EMDEs) using inflation targeting to determine monetary policy, and many of them for over 15 years, it is possible to create a meaningful measure of neutral real interest rates in these economies. The neutral real interest rate provides policymakers with a benchmark for the interest rate at which economic activity reaches its full potential and inflation will stabilize. The deviation of policy rates from this neutral rate determines whether monetary policy is accommodative or restrictive. This paper provides aggregate estimates of the neutral rate in 20 of these economies. EMDEs have seen a decline in the neutral rate of 4 percentage points, from over 6 percent in 2000 to closer to 2 percent at the end of 2019; advanced economies saw an above 2 percentage point decline over this period. The decline of neutral real interest rates in EMDEs can only partially be related to domestic drivers of desired savings and investment. The secular decline in the neutral rate of interest is limiting the ability of EMDEs to stimulate economies in the face of large shocks. The neutral real interest rate is unobservable and subject to a high degree of uncertainty, double the size of that for advanced economies. With such high uncertainty determining the stance of monetary policy in these economies is a challenge.en
dc.identifierhttp://documents.worldbank.org/curated/en/893151624478783247/Neutral-Real-Interest-Rates-in-Inflation-Targeting-Emerging-and-Developing-Economies
dc.identifier.doi10.1596/1813-9450-9711
dc.identifier.urihttps://hdl.handle.net/10986/35831
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 9711
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectINFLATION
dc.subjectREAL INTEREST RATE
dc.subjectMONETARY POLICY
dc.subjectTAYLOR RULE
dc.subjectDEVELOPING ECONOMIES
dc.subjectNEUTRAL REAL INTEREST RATE
dc.subjectECONOMIC STIMULUS
dc.subjectECONOMIC SHOCK
dc.titleNeutral Real Interest Rates in Inflation Targeting Emerging and Developing Economiesen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleNeutral Real Interest Rates in Inflation Targeting Emerging and Developing Economies
okr.date.disclosure2021-06-23
okr.date.doiregistration2025-04-10T11:11:56.407854Z
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/893151624478783247/Neutral-Real-Interest-Rates-in-Inflation-Targeting-Emerging-and-Developing-Economies
okr.guid893151624478783247
okr.identifier.doi10.1596/1813-9450-9711
okr.identifier.externaldocumentum090224b08873d815_1_0
okr.identifier.internaldocumentum33205570
okr.identifier.reportWPS9711
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/893151624478783247/pdf/Neutral-Real-Interest-Rates-in-Inflation-Targeting-Emerging-and-Developing-Economies.pdfen
okr.topicMacroeconomics and Economic Growth::Business Cycles and Stabilization Policies
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicMacroeconomics and Economic Growth::Inflation
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.unitProspects Group
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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