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  • 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. (xsd:string)
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?:dateModified
  • 2024 (xsd:gyear)
?:datePublished
  • 2024 (xsd:gyear)
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  • en (xsd:string)
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  • R* and Convergence (xsd:string)
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  • Arbeitspapier (xsd:string)
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  • GESIS-SSOAR (xsd:string)
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?:urn
  • urn:nbn:de:0168-ssoar-94362-2 ()
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  • 55 (xsd:string)