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%T R* and Convergence %A Ertl, Martin %A Rabitsch, Katrin %P 53 %V 55 %D 2024 %K natural rate of interest; New Keynesian DSGE model %~ IHS (Wien) %> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-94362-2 %X We explore the natural rate of interest, shortly r*, in emerging economies. If economic growth originates from convergence, then growth, say, from technological progress will be lower than we find in the data and, hence, r* will be lower. Ignoring convergence upwardly biases our estimates of r*. We extend the New Keynesian small open economy model to take account of convergence. The model is estimated with Bayesian techniques for four emerging economies in Central and Eastern Europe: Poland, Czech Republic, Hungary and Romania. The estimation process is informed by empirical evidence about a rapid catch-up of our example economies during the period from 2003 to 2019. We confirm the decline in r* over the last decades. When we account for capital deepening, we find meaningful differences with non-negligible implications for monetary policy. %C AUT %C Wien %G en %9 Arbeitspapier %W GESIS - http://www.gesis.org %~ SSOAR - http://www.ssoar.info