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Safety, Liquidity, and the Natural Rate of Interest

Author

Listed:
  • Marco Del Negro

    (Federal Reserve Bank of New York)

  • Domenico Giannone

    (Federal Reserve Bank of New York)

  • Marc P. Giannoni

    (Federal Reserve Bank of New York)

  • Andrea Tambalotti

    (Federal Reserve Bank of New York)

Abstract

Why are interest rates so low in the Unites States? We nd that they are low mostly because the premium for safety and liquidity has increased since the late 1990s. We reach this conclusion using two complementary perspectives: a exible time series model of trends in nominal rates, Treasury and corporate yields, in ation, and long term expectations, and a medium-scale DSGE model. We discuss the implications of this nding for the natural rate of interest.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marco Del Negro & Domenico Giannone & Marc P. Giannoni & Andrea Tambalotti, 2017. "Safety, Liquidity, and the Natural Rate of Interest," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 235-316.
    • Handle: RePEc:bin:bpeajo:v:48:y:2017:i:2017-01:p:235-316
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    More about this item

    Keywords

    interest rates; safety; liquidity; interest; Treasury; economic growth; inflation; corporate yields; models;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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