Two Crises and the Natural Rate of Interest: Evidence from Taiwan, Thailand, and Korea

Abstract

By applying the Holston et al. (2017) methodology, we estimate the natural rates of interest for Taiwan, Thailand, and Korea. This paper discusses four main findings. First, we find evidence of time-variation in natural rates of interest for all three economies. Second, natural rates of interest for these economies declined during the past few decades. Third, Thailand’s natural rate of interest fell substantially only after the Asian Financial Crisis, but Taiwan’s natural rate of interest declined sharply only after the Global Financial Crisis. Meanwhile, Korea’s natural rate of interest plummeted in the immediate aftermath of both the Asian Financial Crisis and the Global Financial Crisis. Fourth, the estimates of the natural rate of interest are highly uncertain.