Estimates of the natural interest rate convey useful information for conducting and communicating monetary policy as well as carry implications for economic policy more generally. The topic has gathered much attention in the post-crisis era, as there is uncertainty regarding the process of monetary policy normalization as well as the future path of interest rates. For the Euro Area, despite sharing a common monetary policy, monetary conditions can vary across countries reflecting differences in their stages in the business cycles, the transmission mechanism via financial markets, and other factors. Our research provides the estimates of the country-specific natural interest rates and their potential drivers and discusses various policy implications of the general decline in the natural interest rates relative to the pre-crisis period.
