National natural rates of interest and the single monetary policy in the euro area

We estimate time-varying national natural real rates of interest (r*) for the four largest economies of the euro area over 1999–2016. We further derive the associated national real interest rate gaps, which gauge the perceived monetary policy stance in each country. We find that the average r* have been lower after 2008. Furthermore, national r* were significantly negative in southern countries during the sovereign crisis. As their effective real rates soared, national rate gaps across the euro area diverged. However, a common policy stance has been restored since 2014 as the European Central Bank's unconventional programs gathered pace.