Over the past two years, we have seen a measurable and persistent rise in real interest rates across many advanced economies, partly reversing the secular decline that started in the early 1980s. This increase in real rates has reignited the debate among academics and policymakers about the level of the natural rate of interest, or r*, the real short-term interest rate that would prevail if the economy was operating at its potential and inflation was at target. The question is whether the recent reversal is a sign that real interest rates will remain higher once the impact of recent shocks has faded, or whether they ... (full story)