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Does slower growth imply lower interest rates?

Author

Listed:
  • Sylvain Leduc
  • Glenn D. Rudebusch

Abstract

Over the past two years, both monetary and fiscal policy projections have been based on the view that declines in the long-run potential growth rate of the economy will in turn push down interest rates. In contrast, examination of private-sector professional forecasts and historical data provides little evidence of such a linkage. This suggests a greater risk that future interest rates may be higher than expected.

Suggested Citation

  • Sylvain Leduc & Glenn D. Rudebusch, 2014. "Does slower growth imply lower interest rates?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00035
    as

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    File URL: http://www.frbsf.org/economic-research/publications/economic-letter/2014/november/interest-rates-economic-growth-monetary-policy/el2014-33.pdf
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    References listed on IDEAS

    as
    1. Congressional Budget Office, 2014. "The Budget and Economic Outlook: 2014 to 2024," Reports 45010, Congressional Budget Office.
    2. Congressional Budget Office, 2014. "An Update to the Budget and Economic Outlook: 2014 to 2024," Reports 45653, Congressional Budget Office.
    3. Congressional Budget Office, 2014. "The Budget and Economic Outlook: 2014 to 2024," Reports 45010, Congressional Budget Office.
    4. Congressional Budget Office, 2014. "An Update to the Budget and Economic Outlook: 2014 to 2024," Reports 45653, Congressional Budget Office.
    5. Congressional Budget Office, 2014. "An Update to the Budget and Economic Outlook: 2014 to 2024," Reports 45653, Congressional Budget Office.
    6. Congressional Budget Office, 2014. "The Budget and Economic Outlook: 2014 to 2024," Reports 45010, Congressional Budget Office.
    7. Congressional Budget Office, 2014. "The Budget and Economic Outlook: 2014 to 2024," Reports 45010, Congressional Budget Office.
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    Citations

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    Cited by:

    1. Vasco Curdia, 2015. "Why so slow? A gradual return for interest rates," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. Paul Hubert & Jérôme Creel & Christophe Blot & Fabien Labondance, 2017. "Are European bond markets overshooting?," Sciences Po publications info:hdl:2441/5apvvnfh349, Sciences Po.
    3. James D. Hamilton & Ethan S. Harris & Jan Hatzius & Kenneth D. West, 2016. "The Equilibrium Real Funds Rate: Past, Present, and Future," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(4), pages 660-707, November.
    4. Mary C. Daly & Fernanda Nechio & Benjamin Pyle, 2015. "Finding normal: natural rates and policy prescriptions," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    5. Kurt G. Lunsford & Kenneth D. West, 2019. "Some Evidence on Secular Drivers of US Safe Real Rates," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 113-139, October.
    6. Benati, Luca, 2020. "Money velocity and the natural rate of interest," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 117-134.
    7. repec:hal:spmain:info:hdl:2441/5apvvnfh3490lodq3fuu3dbmjl is not listed on IDEAS
    8. Feng Zhu, 2016. "A spectral perspective on natural interest rates in Asia-Pacific: changes and possible drivers," BIS Papers chapters, in: Bank for International Settlements (ed.), Expanding the boundaries of monetary policy in Asia and the Pacific, volume 88, pages 63-149, Bank for International Settlements.

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