publication . Article . 2008

The Neutral Interest Rate: Estimates for Chile

Rodrigo Fuentes S; Fabián Gredig U.;
Open Access
  • Published: 01 Jan 2008 Journal: Economía Chilena, volume 11, issue 2 August, pages 47-58
Abstract
To estimate the neutral real interest rate for Chile, we use a variety of methods that can be classified into three categories: those derived from economic theory, the neutral rate implicit in financial assets, and statistical procedures using macroeconomic data. We conclude that the neutral rate is not constant over time, but it is closely related with—though not equivalent to—the potential GDP growth rate. The application of the different methods yields fairly similar results. The neutral real interest rate for Chile seems to be in the range from 2.1% to 3.5%, with a median of 2.8% taking data of the fourth quarter of 2007.
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