Lewis and Vazquez-Grande (2017) examine parameter uncertainty and alternative specifications in the estimation of the natural rate of interest. Under some specifications, they find an estimated r* at the end of 2016 of close to 2 percent, far higher than the about 0.5 percent reported by the methodology of Holston, Laubach, and Williams (forthcoming). 3 See Holston, Laubach, and Williams (forthcoming).
7 This effect has been further reinforced by the beneficial impact of lower long-term yields on the macroeconomic outlook and hence on the macroeconomic risk embedded in lending rates. Counterfactual simulations by our staff attribute 40–60bps in the decline in bank lending rates to the indirect impact of the TLTROs and APP through this channel.