Measuring the Natural Rate of Interest
 
 
The Laubach-Williams (“LW”) and Holston-Laubach-Williams (“HLW”) models provide estimates of the natural rate of interest, or r-star, and related variables. Their approach defines r-star as the real short-term interest rate expected to prevail when an economy is at full strength and inflation is stable.

R-STAR FOR THE UNITED STATES
LW Estimation



The Laubach-Williams (2003) model uses data on real GDP, inflation, and the federal funds rate to extract trends in U.S. economic growth and other factors influencing the natural rate of interest. Link through the main navigation tabs above to a data visualization.

Download Data Series and Code for LW Estimation
Real-time estimates (based on vintage data)
Current model estimates (previously labeled "updated estimates"; data include parameter estimates)
Replication code
Notes on the August 31, 2018, estimates

Reference
Laubach and Williams. 2003. “Measuring the Natural Rate of Interest,” Review of Economics and Statistics 85, no.4 (November): 1063-70.

Working paper version: “Measuring the Natural Rate of Interest”

2018 Release Dates
August 31
November 30
Note: We publish estimates on a quarterly basis, tying our calendar to the official GDP release schedules for the United States (LW) and Canada (HLW). We observe blackout periods surrounding Federal Open Market Committee meetings and defer publication to the first day following blackouts. The New York Fed does not offer individualized services to readers, such as custom charts or analysis.

The Laubach-Williams and Holston-Laubach-Williams estimates were previously published on the Federal Reserve Bank of San Francisco’s website. No aspects of the methodology changed when publication moved to the Federal Reserve Bank of New York. See our “Notes” summarizing the effects of the 2018 National Income and Product Account (NIPA) revisions on our estimates of r-star and related variables above.

How to cite this report: Federal Reserve Bank of New York, Measuring the Natural Rate of Interest, https://www.newyorkfed.org/research/policy/rstar/overview.




Disclaimer: The Laubach-Williams and Holston-Laubach-Williams estimates are not official forecasts of the Federal Reserve Bank of New York, its president, the Federal Reserve System, or the Federal Open Market Committee.

R-STAR FOR ADVANCED ECONOMIES
HLW Estimation



The Holston-Laubach-Williams (2017) model extends this analysis to other advanced economies, estimating r-star and related variables for the United States, Canada, the Euro Area, and the United Kingdom. Link through the main navigation tabs above to a data visualization.

Download Data Series and Code for HLW Estimation
Real-time estimates
Current model estimates
Replication code

Reference
Holston, Laubach, and Williams. 2017. “Measuring the Natural Rate of Interest: International Trends and Determinants,” Journal of International Economics 108, supplement 1 (May): S39–S75.

Working paper version: “Measuring the Natural Rate of Interest: International Trends and Determinants”

2018 Release Dates
August 31
December 3 (subject to data availability)
R-star is the real interest rate expected to prevail when the economy is operating at its full sustainable level, while the output gap measures the extent to which the economy is currently operating above or below this sustainable level. Using the Laubach-Williams model, we calculate these estimates for the United States, along with estimates for trend growth—a source of change driving r-star.
Holston, Laubach, and Williams estimate the natural rate of interest, trend growth, and the output gap for four economies—the United States, Canada, the United Kingdom, and the Euro Area—using a version of the Laubach-Williams model. For each economy, the analysis employs data on real GDP, inflation, and a short-term interest rate to extract trends in economic growth and other factors influencing r-star.