Authors: Kathryn Holston, Thomas Laubach, and John C. Williams
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Staff Reports
Measuring the Natural Rate of Interest after COVID-19
Number 1063
June 2023
June 2023
JEL classification: C32, E43, E52, O40
We modify the Laubach-Williams and Holston-Laubach-Williams models of the natural rate of interest to account for time-varying volatility and a persistent COVID supply shock during the pandemic. Resulting estimates of the natural rate of interest in the United States, Canada, and the Euro Area at the end of 2022 are close to their respective levels estimated directly before the pandemic; that is, we do not find evidence that the era of historically low estimated natural rates of interest has ended. In contrast, estimates of the natural rate of output have declined relative to those projected before the pandemic.
Author Disclosure Statement(s)
Kathryn Holston
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
John Williams
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
John Williams
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
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