Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300653 
Year of Publication: 
2024
Series/Report no.: 
Arbeitspapier No. 03/2024
Publisher: 
Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung, Wiesbaden
Abstract: 
The European Central Bank (ECB) strives to maintain inflation at a 2% target rate, yet the Euro area's diverse economies pose challenges to achieving this goal with a single nominal interest rate. Effective monetary policy transmission hinges on synchronizing the Natural Rate of Interest (NRI) across constituent economies. This note investigates NRI synchronization between Germany, the largest Euro area economy, and the entire Euro area. Utilizing Bayesian estimation of the Holston et al. (2017) model, we find robust synchronization between Germany's NRI and that of the entire Euro area, even amid level differences, supporting effective monetary policy coordination.
Subjects: 
unobserved component model
natural rate of interest
HLW model
Euro area
Germany
JEL: 
C32
E43
E52
Document Type: 
Working Paper

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