The stakes have become even higher in recent years when central banks try to estimate the natural rate of interest.
As seen in the debate on the Secular Stagnation hypothesis proposed by Professor Lawrence Summers of Harvard University, uncertainty regarding the natural rate of interest makes it much more difficult for central banks to steer a clear course in terms of policy decisions.3 While I am not going into the details of his hypothesis, many of us can agree that the natural rate of interest has declined in recent years and because of this decline, combined with the effective lower bound on nominal interest rates, many central banks in advanced economies developed new unconventional monetary policy tools and have embarked on carefully crafted but bold actions.