Do monetary policy shocks affect the neutral rate of interest? / Danilo Leiva-Leon, Rodrigo Sekkel, Luiz Uzeda. : FB3-5/2026-6E-PDF

"We develop a Trend-Cycle Bayesian VAR that jointly estimates the real neutral rate of interest, r*t, and identifies monetary policy shocks. A key innovation is that cyclical shocks, notably monetary policy shocks, can affect the trend of macroeconomic variables, providing a way to assess whether transitory disturbances have persistent effects. Using external instruments, we find that contractionary shocks reduce r*t, and lower trend GDP growth. Although they generate sizable movements, their contribution to the secular decline in r*t, is modest and slightly positive since the early 1990s. Cross-country evidence shows similar patterns"--Abstract.

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