While Hayek's Prices and Production established his reputation as a business-cycle theorist, Sraffa's 1932 review of the book helped turn professional opinion against him. A key criticism of Sraffa was that Hayek's conception of a natural rate of interest, reflecting only real relationships, was...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...