Reports on CDC and FDA from Federal Reserve Board Provide New Insights (Estimates of the Natural Rate of Interest Consistent With a Supply-side Structure and a Monetary Policy Rule for the Us Economy): CDC and FDA

2025 MAR 06 (NewsRx) -- By a News Reporter-Staff News Editor at CDC & FDA Daily -- Investigators publish new report on CDC and FDA. According to news reporting originating in Washington, District of Columbia, by NewsRx journalists, research stated, “We estimate the natural rate of interest (r*) using a semi- structural model of the U.S. economy that jointly characterizes the trend and cyclical factors of key macroeconomic variables such as output, the unemployment rate, inflation, and short- and long-term interest rates. We specify a monetary policy rule and a 10-year Treasury yield equation to exploit the information provided by both interest rates to infer r*.”

The news reporters obtained a quote from the research from Federal Reserve Board, “However, the use of a monetary policy rule with a sample that spans the Great Recession and its aftermath poses a challenge because of the effective lower bound. We devise a Bayesian estimation technique that incorporates a Tobit-like specification to deal with the censoring problem. We compare and validate our model specifications using pseudo-out-of-sample forecasting exercises. Our results show that the smoothed value of r* declined sharply around the Great Recession, eventually falling below zero, and remained negative through early 2020. Our results also indicate that obviating the censoring would imply higher estimates of r* than otherwise.”

According to the news reporters, the research concluded: “We also extend our results to the COVID-19 pandemic period, introducing stochastic volatility in the model and dealing with the massive swings in the data, to find that our estimate of r* is slightly below 1 percent in early 2023.”

This research has been peer-reviewed.

For more information on this research see: Estimates of the Natural Rate of Interest Consistent With a Supply-side Structure and a Monetary Policy Rule for the Us Economy. International Journal of Central Banking, 2025;21(1):137-199. International Journal of Central Banking can be contacted at: Assoc International Journal Central Banking, Postfach 16 03 19, Frankfurt, 60066, Germany.

Our news correspondents report that additional information may be obtained by contacting Manuel Gonzalez-Astudilloa, Federal Reserve Board, Washington, DC 20005, United States.

(Our reports deliver fact-based news of research and discoveries from around the world.)