Working Paper: NBER ID: w25039
Authors: Marco Del Negro; Domenico Giannone; Marc P. Giannoni; Andrea Tambalotti
Abstract: The trend in the world real interest rate for safe and liquid assets fluctuated close to 2 percent for more than a century, but has dropped significantly over the past three decades. This decline has been common among advanced economies, as trends in real interest rates across countries have converged over this period. It was driven by an increase in the convenience yield for safety and liquidity and by lower global economic growth.
Keywords: Interest Rates; Global Economy; Convenience Yield; Demographics
JEL Codes: E43; E44; F31; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| estimated trend in the world real interest rate (E43) | decline in world real interest rates (E43) |
| convergence of trends across advanced economies (F62) | decline in world real interest rates (E43) |
| increased integration in international asset markets (F30) | convergence of trends across advanced economies (F62) |
| increase in convenience yields (D11) | decline in world real interest rates (E43) |
| global decline in the growth rate of per capita consumption (F62) | decline in world real interest rates (E43) |
| demographic shifts (J11) | global decline in the growth rate of per capita consumption (F62) |