Measuring the Financial Stability Real Interest Rate, r**
![Decorative photo: gold image of coins with bar and line chart super imposed.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/05/LSE_2023_financial-post3_akinci-920_x_576-1.jpg?w=920)
Comparing our financial stability real interest rate, r** (“r-double-star”) with the prevailing real interest rate gives a measure of how vulnerable the economy is to financial instability. In this post, we first explain how r** can be measured, and then discuss its evolution over the last fifty years and how to interpret the recent banking turmoil within this framework.