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MNI: Market Measures Of r* Steadier In Pandemic-ECB Economists

(MNI) ROME

Long-term trends keep r* lower, ECB staff finds.

Financial market-based measures and surveys proved more reliable than macroeconomic models at estimating the neutral real rate of interest during the abrupt economic fluctuations of the pandemic, European Central Bank economists told MNI, adding that r-star is now at similar levels to pre-Covid times.

“Models that really rely on extracting r-star measures based on economic fluctuations, they will translate these fluctuations that we saw during the pandemic into fluctuations in r-star,” the head of the ECB's Strategy Issues Section Claus Brand told an MNI podcast in which he was accompanied by senior economists Noemie Lisack and Falk Mazelis.

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Financial market-based measures and surveys proved more reliable than macroeconomic models at estimating the neutral real rate of interest during the abrupt economic fluctuations of the pandemic, European Central Bank economists told MNI, adding that r-star is now at similar levels to pre-Covid times.

“Models that really rely on extracting r-star measures based on economic fluctuations, they will translate these fluctuations that we saw during the pandemic into fluctuations in r-star,” the head of the ECB's Strategy Issues Section Claus Brand told an MNI podcast in which he was accompanied by senior economists Noemie Lisack and Falk Mazelis.

Keep reading...Show less