In this study, neutral real interest rate gap and output gap are estimated jointly under two
different multivariate unobserved components models with the motivation to provide
empirical measures that can be used to analyze the amount of stimulus that monetary
policy is passing on to the economy, and to understand historical macroeconomic
developments. In the analyses, Kalman filter technique is applied to a small-scale
macroeconomic model of the Turkish economy to estimate the unobserved variables for
the period 1989-2005. In addition, two alternative specifications for neutral real interest
rate are used in the analyses. The first model uses a random walk model for the neutral
real interest rate, whereas the second one employs more structural specification, which
specifically links the neutral real rate with the trend growth rate and the long-term course
of the risk premium. Comparison of the models developed by using various performance
criteria clearly indicates the use of more structural specification against random walk
specification. Results suggest that though there is relatively high uncertainty surrounding
the neutral real interest rate estimates to use them directly in the policy-making process,
estimates appear to be very useful for ex-post monetary policy evaluations.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/12607426/index.pdf |
| Date | 01 July 2006 |
| Creators | Ogunc, Fethi |
| Contributors | Batmaz, Inci |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
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