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A Long View of Real Rates

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  • Chadha, Jagjit S
  • Dimsdale, Nicholas H

Abstract

In light of the large and sustained rise in real interest rates in the late 1970s and early 1980s, this paper reviews: (i) the theoretical discussion on the determination of nominal and real interest rates; (ii) the factors determining real interest rates; and (iii) problems of defining and measuring the real rate. We go on to examine the historical record of real interest rates in France, Germany, the UK, and the USA since 1875. We find that high real rates since 1980 seem to be a return to a long-run norm, and it is the period from the Second World War to 1979 that represents a more natural period in which to investigate an abrupt change of behaviour for real interest rates. Copyright 1999 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 15 (1999)
Issue (Month): 2 (Summer)
Pages: 17-45

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Handle: RePEc:oup:oxford:v:15:y:1999:i:2:p:17-45

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Cited by:
  1. Guðmundur Guðmundsson, 2000. "Prospects of Icelandic pension funds," Economics wp06, Department of Economics, Central bank of Iceland.
  2. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics, Department of Economics, University of Kent 1317, Department of Economics, University of Kent.
  3. Markus Brückner & Kerstin Gerling & Hans Grüner, 2010. "Wealth inequality and credit markets: evidence from three industrialized countries," Journal of Economic Growth, Springer, Springer, vol. 15(2), pages 155-176, June.
  4. Claude Lopez, 2008. "Euro-zone Inflation Rates: Stationary or Regime-wise Stationary Processes," University of Cincinnati, Economics Working Papers Series, University of Cincinnati, Department of Economics 2008-02, University of Cincinnati, Department of Economics, revised 2008.
  5. Genevieve Verdier, 2003. "What Drives Long-term Capital Flows? A Theoretical and Empirical Investigation," Macroeconomics, EconWPA 0310011, EconWPA, revised 14 Jul 2005.
  6. Nicholas Crafts & Terence C. Mills, 2012. "Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain," Working Papers 0031, European Historical Economics Society (EHES).
  7. Genevieve Verdier, 2005. "The (Much Understated) Quantitative Role of Capital Accumulation and Saving," Macroeconomics, EconWPA 0507015, EconWPA.
  8. Muhammad Naveed Tahir, 2011. "Inflation Targeting, Exchange Rate and Financial Globalization," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1130, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  9. Cour-Thimann, Philippine & Pilegaard, Rasmus & Stracca, Livio, 2006. "The output gap and the real interest rate gap in the euro area, 1960-2003," Journal of Policy Modeling, Elsevier, Elsevier, vol. 28(7), pages 775-790, October.
  10. Muhammad Naveed Tahir, 2011. "Inflation Targeting, Exchange Rate and Financial Globalization," Working Papers halshs-00646601, HAL.
  11. G. Everaert, 2012. "A Panel Analysis of the Fisher Effect with an Unobserved I(1) World Real Interest Rate," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 12/782, Ghent University, Faculty of Economics and Business Administration.
  12. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era and After," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 18(4), pages 479-494.
  13. Gulbin Sahinbeyoglu, 2001. "Monetary Transmission Mechanism : A View From A High Inflationary Environment," Discussion Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0101, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Christian Upper & Andreas Worms, 2003. "Real long-term interest rates and monetary policy: a cross-country perspective," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 234-257 Bank for International Settlements.
  15. Crafts, Nicholas, 2013. "What Does the 1930s’ Experience Tell Us about the Future of the Eurozone?," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 142, Competitive Advantage in the Global Economy (CAGE).
  16. Philip Arestis & Malcolm Sawyer, 2003. "The Case for Fiscal Policy," General Economics and Teaching, EconWPA 0306005, EconWPA.
  17. Jagjit S. Chadha, 2012. "World Real Interest Rates: A Tale of Two Regimes," Studies in Economics, Department of Economics, University of Kent 1205, Department of Economics, University of Kent.

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