Measuring the natural rates of interest of OECD and BRICS economies : A time varying perspective

This paper measures the natural rates of interest of eleven economies including six OECD economies and five emerging economies of BRICS in a coherent time varying parameter vector autoregression framework. We find that the natural rates of interest in OECD economies have been descending especially since the 2007–2009 financial crisis. The trends of natural rates of BRICS economies do not share one common pattern. The descending trend of the natural rate of interest is a regional developed world phenomenon instead of a global one. Economic growth and Demographic structure are the dominant factors that affect the variations of natural rates of OECD economies compared with the factor of desire to safe assets while demographic structure is the most important factor for BRICS economies.