Open AccessPosted Content
Three Questions on R-star
Reads0
Chats0
TLDR
The decline in the natural rate of interest, or r-star, over the past decade raises three important questions: 1) is this low level for the real short-term interest rate unique to the U.S. economy? 2) Is the natural rates likely to remain low in the future? 3) Is this low rate confined to?safe? assets? In as mentioned in this paper, evidence suggests that low rates are a global phenomenon, is likely to be very persistent, and is not confined only to safe assets.Abstract:
The decline in the natural rate of interest, or r-star, over the past decade raises three important questions. First, is this low level for the real short-term interest rate unique to the U.S. economy? Second, is the natural rate likely to remain low in the future? And third, is this low level confined to ?safe? assets? In answer to these questions, evidence suggests that low r-star is a global phenomenon, is likely to be very persistent, and is not confined only to safe assets.read more
Citations
More filters
Posted Content
What to Expect from the Lower Bound on Interest Rates: Evidence from Derivatives Prices
TL;DR: In this article, the effects of the lower bound for interest rates on the distributions of expectations for future inflation and interest rates are analyzed in a stylized model where the policy instrument is subject to a lower bound.
Journal ArticleDOI
Measuring the Natural Rate of Interest: Alternative Specifications
TL;DR: In this paper, the effect of full parameter uncertainty and alternative specifications for the underlying components of the natural rate of interest (r∗) was analyzed for the median estimate of r∗ within the Laubach and Williams model.
Posted Content
The Future Fortunes of R-star: Are They Really Rising?
TL;DR: In the current economic environment, it is important to distinguish between the strong economic conditions and the key longer-run drivers underpinning interest rates as mentioned in this paper, and three factors, demographics, productivity growth, and the demand for safe assets, point to the natural rate of interest remaining low for quite some time.
Posted Content
Interest Rates and the "New Normal"
TL;DR: The Federal Reserve is moving towards more normal monetary policy, which means rising interest rates as discussed by the authors. But factors including the real natural rate of interest, a slower sustainable pace of growth, and inflation all point to a new normal where interest rates are lower than in the 1990s and early 2000s.
Posted Content
New Evidence for a Lower New Normal in Interest Rates
TL;DR: The authors showed that a decline in the natural rate of interest has contributed about 2 percentage points to the general downward trend in yields over the past two decades, and argued that yields have been pushed down by declines in longer-run expectations of the normal inflation-adjusted short-term interest rate.
References
More filters
Journal ArticleDOI
Credit Spreads and Business Cycle Fluctuations
Simon Gilchrist,Egon Zakrajsek +1 more
TL;DR: In this paper, the authors examined the relationship between credit spreads and economic activity, by constructing a credit spread index based on an extensive data set of prices of outstanding corporate bonds trading in the secondary market and found that the predictive content of credit spreads for economic activity is due primarily to movements in the excess bond premium.
Journal ArticleDOI
U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound
TL;DR: For example, the authors pointed out that what happens in the short run has a profound impact on the long run and that there is no long run except through short run, and that if you die in short run there are no long runs.
Journal ArticleDOI
Measuring the Natural Rate of Interest: International Trends and Determinants
TL;DR: This paper applied the Laubach-Williams methodology to the United States and three other advanced economies (Canada, the Euro Area, and the United Kingdom) and found that large declines in trend GDP growth and natural rates of interest have occurred over the past 25 years in all four economies.
Journal ArticleDOI
Secular drivers of the global real interest rate
Lukasz Rachel,Tom Smith +1 more
TL;DR: In this article, the authors identify which secular trends could have driven the long-term real interest rates across the world, and they suggest that the global neutral rate may settle at (or slightly below) 1% in the medium to long run.
Posted Content
Global Imbalances and Currency Wars at the ZLB
Ricardo J. Caballero,Ricardo J. Caballero,Emmanuel Farhi,Emmanuel Farhi,Pierre-Olivier Gourinchas +4 more
TL;DR: The authors explores the consequences of extremely low equilibrium real interest rates in a world with integrated but heterogenous capital markets, and nominal rigidities. But their model is limited to the case where there is some degree of price or wage flexibility.