The natural, equilibrium, or neutral Interest rate - or short r* - has been controversial among economists ever since it was introduced almost 150 years ago. As a conceptual tool that cannot be directly measured but only estimated by models, its value depends on the relevance for explaining...

This paper evaluates the impact of rare disasters on the natural interest rate and macroeconomic conditions by simulating a nonlinear New-Keynesian model. The model is calibrated using data on natural disasters in OECD countries. From an ex-ante perspective, disaster risk behaves as a negative...