Ruhr Economic Papers

Ruhr Economic Papers #621

Equilibrium Real Interest Rates and Secular Stagnation – An Empirical Analysis for Euro Area Member Countries

by Ansgar Belke and Jens Klose

UDE, 07/2016, 29 S./p., 8 Euro, ISBN 978-3-86788-723-6 DOI: 10.4419/86788723



Is secular stagnation a valid concern for Euro Area countries? We tackle this question
using the well-established Laubach-Williams model to estimate the unobservable
equilibrium real interest rate and compare it to the actual real rate. We apply our
approach to twelve Euro Area countries, since heterogeneity among member countries
has become considerably extensive since the beginning of the financial crisis. Hence,
the question of secular stagnation has to be answered at the country level. Our results
indicate that secular stagnation does not appear to be a significant threat to most Euro
Area countries. But there is one exception: Greece.

JEL-Classification: E43, F45, C32

Keywords: Equilibrium real interest rate; secular stagnation; Euro Area countries; heterogeneity