IMF paper finds falling r* should eventually reverse
Authors say several policies could be used to push natural rate back up
The decline in the natural rate of interest, r*, may reverse in the coming years and could be helped by policy actions, according to research published by the International Monetary Fund.
Josef Platzer and Marcel Peruffo design a model featuring heterogeneous agents, overlapping generations and “non-homothetic preferences”, meaning that different households have different responses to changes in income.
They explore the main factors suggested in the economic literature as driving down the
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