IDEAS home Printed from
   My bibliography  Save this paper

Factors Behind Low Long-Term Interest Rates


  • Rudiger Ahrend
  • Pietro Catte
  • Robert W. R. Price


Long-term bond yields have been low in recent years both in nominal and real terms, and . especially in the United States - they have reacted differently to shifts in monetary and fiscal stances relative to previous cycles. This article examines various possible explanations for this behaviour, such as the effects of changes in monetary policy frameworks on inflation and interest rate expectations; developments in ex ante saving-investment balances, and shifts in investors. portfolio preferences (including official reserve accumulation, .petro-dollar. recycling and pension fund demand for longer maturities). The paper finds that it is unlikely that any individual explanation can account for the level and profile of bond yields in recent years, but that an important element has been a compression in term premia, together with shifts in expected short rates. Even though bond yields have started to rise in the early part of 2006, they are unlikely to go back to the levels that prevailed in the 1980s or the early 1990s, as several of the factors that drove them lower are set to persist. Éléments à l'origine de la faiblesse des taux d'intérêt à long terme Au cours des années récentes les rendements des obligations à long terme ont été faibles tant en termes nominaux qu’effectifs. Par rapport aux cycles économiques antérieurs, ils ont réagi différemment aux changements de politique monétaire et budgétaire, notamment aux États-Unis. Cet article examine plusieurs explications potentielles de ces comportements comme les effets d’un changement de cadre de la politique monétaire sur l’inflation et les anticipations de taux d’intérêt; l’évolution des soldes ex ante d’épargne et d’investissement et les changements de préférence dans les placements des investisseurs (y compris l’accumulation des réserves officielles, le recyclage des « pétrodollars » et la demande des fonds de pension pour des obligations à maturité longue). L’article conclut qu’il est improbable qu’une seule explication puisse rendre compte du niveau et du profil des rendements obligataires au cours des dernières années. Toutefois, un élément clef a été la réduction de la prime de risque, accompagnée par des changements dans les anticipations de taux d’intérêt à court terme. Néanmoins, bien que les rendements des obligations aient commencé à remonter au début de l’année 2006, il est peu vraisemblable qu’ils atteignent les niveaux enregistrés dans les années 1980 et au début des années 1990, dans la mesure où plusieurs des facteurs qui ont entraîné leur déclin sont amenés à perdurer.

Suggested Citation

  • Rudiger Ahrend & Pietro Catte & Robert W. R. Price, 2006. "Factors Behind Low Long-Term Interest Rates," OECD Economics Department Working Papers 490, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:490-en

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, EconWPA.
    2. Isabelle Joumard, 2003. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
    3. Kwang-Yeol Yoo, 2003. "Corporate Taxation of Foreign Direct Investment Income 1991-2001," OECD Economics Department Working Papers 365, OECD Publishing.
    4. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, April.
    5. Katrin Millock & Céline Nauges & Thomas Sterner, 2004. "Environmental Taxes: A Comparison of French and Swedish Experience from Taxes on Industrial Air Pollution," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(1), pages 30-34, 04.
    6. Calmfors, L. & Nymoen, R., 1990. "Real Wage Adjustment And Employment Policies In The Nordic Countries," Papers 461, Stockholm - International Economic Studies.
    7. Laurent Flochel & Thierry Madies, 2002. "Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 121-141, March.
    8. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Ann Vourc'h & Patrick Lenain, 2001. "Comment encourager une croissance écologiquement durable en France ?," OECD Economics Department Working Papers 314, OECD Publishing.
    10. Willi Leibfritz & John Thornton & Alexandra Bibbee, 1997. "Taxation and Economic Performance," OECD Economics Department Working Papers 176, OECD Publishing.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Karlis Vilerts & Olegs Tkacevs, 2016. "The Impact of Sovereign Bond Yields on Fiscal Discipline," Working Papers 2016/05, Latvijas Banka.
    2. Clerc, L., 2007. "Understanding Asset Prices: Determinants and Policy Implications," Working papers 168, Banque de France.
    3. Brigitte Desroches & Michael Francis, 2010. "World real interest rates: a global savings and investment perspective," Applied Economics, Taylor & Francis Journals, vol. 42(22), pages 2801-2816.
    4. Goknur Umutlu & Yilmaz Yildız, 2011. "The Effect of Global Liquidity on Macroeconomic Parameters," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 1(3), pages 167181-1671, September.
    5. Michele Battisti & Tamara Fioroni & Andrea Mario Lavezzi, 2014. "World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model," Discussion Papers 2014/184, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Hermann Remsperger & Markus Taube & Berend Diekmann & Carsten Hermann-Pillath & Rüdiger Ahrend, 2007. "Welche Konsequenzen hat Chinas wachsender Einfluss auf die Weltwirtschaft?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 60(13), pages 03-19, July.
    7. Rudiger Ahrend & Boris Cournède & Robert W. R. Price, 2008. "Monetary Policy, Market Excesses and Financial Turmoil," OECD Economics Department Working Papers 597, OECD Publishing.
    8. Ahrend, Rudiger, 2010. "Monetary ease: A factor behind financial crises? Some evidence from OECD countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-30.

    More about this item


    accumulation des réserves; anticipation d'inflation; bond spread; bond yield; capital flows; compte courant; credibility; crédibilité; current account; financial markets; flux de capitaux; fonds de pension; inflation expectation; interest rate; marchés financiers; monetary policy; neutral rate; pension fund; petro-dollar; politique monétaire; portfolio preferences; prime de risque; prime à terme; préférences en matière de placements; pétrodollar; rendement des obligations; reserve accumulation; risk premia; saving-investment balance; solde d'épargne et d'investissement; spread de crédit; taux d'intérêt; taux neutre; term premia;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F2 - International Economics - - International Factor Movements and International Business
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:490-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.