IDEAS home Printed from
   My bibliography  Save this paper

Accounting for Medium-run Macro-finance Trends


  • Francois Gourio

    (Federal Reserve Bank of Chicago)

  • Emmanuel Farhi

    (Harvard University)


A large amount of recent (and ongoing) research tries to understand why real interest rates have fallen over the past three decades. We contribute to this literature in three ways. We first document empirically that the large decline in the level of real interest rates has occurred while investment, profitability, and the price-earnings have remained roughly stable. We view these additional moments as important targets for any explanation of interest rates. For instance, an increase in the supply of savings due to an aging population would naturally lead to an increase in investment. We next use a simple endowment economy model to study which explanations can account for the observed moments of asset prices. In a final step, we use a simple business cycle model to show how various factors (such as demographics, lower productivity growth, a larger demand for safe assets, a higher perceived risk premium, or an increase in market power) affect our target moments, outlining a possible identification of the key drivers of the trends.

Suggested Citation

  • Francois Gourio & Emmanuel Farhi, 2017. "Accounting for Medium-run Macro-finance Trends," 2017 Meeting Papers 1472, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:1472

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    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:red:sed017:1472. 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: (Christian Zimmermann). 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.