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Living with low for long

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  • Bean, Charles

Abstract

I review the causes and some of the consequences of the recent decline in global real interest rates. Causes include: a higher propensity to save associated with a rise in the population share of the high-saving middle-aged; a weaker propensity to invest since the 2007-8 financial crisis; and portfolio shifts towards safer assets. Consequences include: an increased likelihood that policy rates are constrained by the zero lower bound, necessitating greater reliance on unconventional monetary policies; and an increased risk of financial instability as investors seek to generate higher yields.

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  • Bean, Charles, 2016. "Living with low for long," LSE Research Online Documents on Economics 65803, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:65803
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    1. Andrea Caggese & Ander Pérez-Orive, 2017. "Capital Misallocation and Secular Stagnation," Finance and Economics Discussion Series 2017-009, Board of Governors of the Federal Reserve System (U.S.).
    2. Signe Krogstrup, 2017. "Monetary Policy Accommodation at the Lower Bound," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(1), pages 7-14, January.
    3. Antonin Bergeaud & Gilbert Cette & Rémy Lecat, 2019. "The Circular Relationship Between Productivity Growth and Real Interest Rates," Working papers 734, Banque de France.
    4. Caggese, Andrea & Pérez-Orive, Ander, 2022. "How stimulative are low real interest rates for intangible capital?," European Economic Review, Elsevier, vol. 142(C).

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    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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