C3 - Multiple or Simultaneous Equation Models; Multiple Variables

• Do Monetary Policy Shocks Affect the Neutral Rate of Interest?

  Staff working paper 2026-6 Danilo Leiva-Leon, Rodrigo Sekkel, Luis Uzeda

  Can monetary policy influence the neutral real interest rate (r-star)? Using a new statistical model, we show that interest rate hikes tend to lower r-star and long-run growth, but that monetary policy explains only a small share of the long-run decline in r-star.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, C5, C51, E, E3, E32, E4, E44 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation