Estimating the natural interest rate is fundamental for the proper definition of the stance of monetary policy. This research applies the Kalman filter to jointly estimate the natural interest rate, potential output and its growth rate for Italy and the Netherlands. The results indicate a decreasing trend in the natural interest rates and point out that a single monetary policy may not optimally suit both countries. There is a link between the real interest rate gap and the output gap, and the estimates of the natural interest rate are subject to a high degree of uncertainty
