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The Secular Decline of Forecasted Interest Rates

Author

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  • Jean-Sébastien Fontaine
  • Bruno Feunou

Abstract

Canadian interest rates show a secular decline since the 1980s. Long-term survey-based forecasts of interest rates also declined, but less so and were more gradual. Our model-based estimates show an endpoint shifting over time in three phases: a decline between 1990 and 1995, a period of stability between 1996 and 2007, and a further decline since 2008. The current endpoint estimate remains clouded with uncertainty; this is an active area of research.

Suggested Citation

  • Jean-Sébastien Fontaine & Bruno Feunou, 2019. "The Secular Decline of Forecasted Interest Rates," Staff Analytical Notes 2019-1, Bank of Canada.
  • Handle: RePEc:bca:bocsan:19-1
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    References listed on IDEAS

    as
    1. Rhys R. Mendes, 2014. "The Neutral Rate of Interest in Canada," Discussion Papers 14-5, Bank of Canada.
    2. Kozicki, Sharon & Tinsley, P. A., 2001. "Shifting endpoints in the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 613-652, June.
    3. Xin Scott Chen & José Dorich, 2018. "The Neutral Rate in Canada: 2018 Estimates," Staff Analytical Notes 2018-22, Bank of Canada.
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    More about this item

    Keywords

    Financial markets; Interest rates;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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