Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297074 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Discussion Paper No. 2023-5
Publisher: 
Bank of Canada, Ottawa
Abstract: 
The neutral rate of interest is an important concept and communication tool for central banks. We develop a small open economy model with overlapping generations to study the determinants of the neutral real rate of interest in a small open economy. The model captures domestic factors such as population aging, declining productivity, rising government debt and inequality. Foreign factors are captured by changes in the global neutral real rate. We use the model to evaluate secular dynamics of the neutral rate in Canada from 1980 to 2018. We find that changes in both foreign and domestic factors resulted in a protracted decline in the neutral rate.
Subjects: 
Economic models
Interest rates
Monetary policy
JEL: 
E21
E22
E43
E50
E52
E58
F41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.