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Measuring the ''World'' Real Interest Rate

Author

Listed:
  • Mervyn King
  • David Low

Abstract

Over the past couple of decades, and especially since the financial crisis in 2008-09, real interest rates have collapsed. For much of the past two years they have been negative, but they have been trending down for some while. But how far have real rates fallen? This note computes a measure of the "world" real interest rate and, where possible, a measure of the implied future real rate. It also makes public our estimates of the "world" real interest rate so they can be used by other researchers.

Suggested Citation

  • Mervyn King & David Low, 2014. "Measuring the ''World'' Real Interest Rate," NBER Working Papers 19887, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19887
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    File URL: http://www.nber.org/papers/w19887.pdf
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    References listed on IDEAS

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    1. Ejsing, Jacob & Garcí­a, Juan Angel & Werner, Thomas, 2007. "The term structure of euro area break-even inflation rates: the impact of seasonality," Working Paper Series 830, European Central Bank.
    2. Joyce, Michael A.S. & Lildholdt, Peter & Sorensen, Steffen, 2010. "Extracting inflation expectations and inflation risk premia from the term structure: A joint model of the UK nominal and real yield curves," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 281-294, February.
    3. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low-Frequency Capital Flows," NBER Chapters, in: NBER International Seminar on Macroeconomics 2013, pages 94-102, National Bureau of Economic Research, Inc.
    4. Howard Howe & Charles Pigott, 1991. "Determinants of long-term interest rates: an empirical study of several industrial countries," Quarterly Review, Federal Reserve Bank of New York, issue win, pages 12-28.
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    Citations

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    Cited by:

    1. Claude Bismut & Ismael Ramajo, 2019. "A world of low interest rates," CEE-M Working Papers hal-02086234, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    2. Gregory Thwaites, 2014. "Why are real interest rates so low? Secular stagnation and the relative price of investment goods," Discussion Papers 1428, Centre for Macroeconomics (CFM).
    3. Claude Bismut & Ismael Ramajo, 2019. "Nominal and real interest rates in OECD countries," CEE-M Working Papers hal-02355139, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    4. Diewert, W. Erwin & Fox, Kevin J., 2019. "Money and the Measurement of Total Factor Productivity," Journal of Financial Stability, Elsevier, vol. 42(C), pages 84-89.
    5. Edward Nelson, 2017. "The Continuing Validity of Monetary Policy Autonomy Under Floating Exchange Rates," Finance and Economics Discussion Series 2017-112, Board of Governors of the Federal Reserve System (US).
    6. Del Negro, Marco & Giannone, Domenico & Giannoni, Marc P. & Tambalotti, Andrea, 2019. "Global trends in interest rates," Journal of International Economics, Elsevier, vol. 118(C), pages 248-262.
    7. Jean-Marc Bourgeon & Margot Hovsepian, 2017. "Green Technology Adoption and the Business Cycle," CESifo Working Paper Series 6485, CESifo Group Munich.
    8. Felipe S. Iachan & Plamen T. Nenov & Alp Simsek, 2015. "The Choice Channel of Financial Innovation," NBER Working Papers 21686, National Bureau of Economic Research, Inc.
    9. repec:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1289-3 is not listed on IDEAS
    10. Corneo, Giacomo, 2015. "Inequality, Public Wealth, and the Federal Shareholder," CEPR Discussion Papers 10920, C.E.P.R. Discussion Papers.
    11. Chen, Peter & Karabarbounis, Loukas & Neiman, Brent, 2017. "The global rise of corporate saving," Journal of Monetary Economics, Elsevier, vol. 89(C), pages 1-19.
    12. Joseph E Gagnon & Philip Turner, 2019. "Monetary and Exchange Rate Policies for Sustained Growth in Asia," National Institute of Economic and Social Research (NIESR) Discussion Papers 497, National Institute of Economic and Social Research.
    13. Lukasz Rachel & Thomas D. Smith, 2017. "Are Low Real Interest Rates Here to Stay?," International Journal of Central Banking, International Journal of Central Banking, vol. 13(3), pages 1-42, September.
    14. Łukasz Rachel & Lawrence H. Summers, 2019. "On Secular Stagnation in the Industrialized World," NBER Working Papers 26198, National Bureau of Economic Research, Inc.
    15. Kei Imakubo & Haruki Kojima & Jouchi Nakajima, 2015. "The natural yield curve: its concept and measurement," Bank of Japan Working Paper Series 15-E-5, Bank of Japan.
    16. repec:gam:jijfss:v:7:y:2019:i:1:p:4-:d:196279 is not listed on IDEAS
    17. Òscar Jordà & Alan M. Taylor, 2019. "Riders on the Storm," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    18. Philip Turner, 2016. "Macroprudential policies, the long-term interest rate and the exchange rate," BIS Working Papers 588, Bank for International Settlements.
    19. Alexius, Annika, 2017. "Why are real interest rates so low? Evidence from a structural VAR with sign restrictions," Research Papers in Economics 2017:6, Stockholm University, Department of Economics.
    20. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    21. repec:prg:jnlpol:v:2018:y:2018:i:1:id:1166:p:116-135 is not listed on IDEAS
    22. Harashima, Taiji, 2018. "Why Are Inflation and Real Interest Rates So Low? A Mechanism of Low and Floating Real Interest and Inflation Rates," MPRA Paper 84311, University Library of Munich, Germany.
    23. Moretti, Laura, 2014. "Monetary policy, long real yields and the financial crisis," CFS Working Paper Series 457, Center for Financial Studies (CFS).

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • 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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