Has the ‘neutral’ interest rate declined and how does it affect central banks’ decisions? This is the biggest question for monetary policy today. Volker Wieland, John C. Williams (Fed San Francisco) and John B. Taylor (Stanford University) have discussed possible answers at Stanford University.
Wieland’s key statement: ‘Estimates of these equilibrium rates are extremely uncertain and sensitive to technical assumptions, and thus should not be used as key determinants of the policy stance.’
See also the debate between Volker Wieland and John Williams at the conference ‘The ECB and its watchers’ in Frankfurt: