Low for (Very) Long? A Long-Run Perspective on r* across Advanced Economies

By Josef Platzer, Francesco Grigoli, Robin Tietz

April 21, 2023

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Format: Chicago

Josef Platzer, Francesco Grigoli, and Robin Tietz. Low for (Very) Long? A Long-Run Perspective on r* across Advanced Economies, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We provide a long-run perspective on neutral interest rates with new estimates for 16 advanced economies since the 1870s using the Laubach and Williams approach. Our estimates differ substantially from commonly used proxies. We find that, while cross-country heterogeneity was significant in the past, since the 1980s the decline has been common to many countries. Traditional determinants such as population aging and productivity growth are strongly correlated with the changes in neutral rates, while others like the relative price of capital and inequality exhibit weak relationships with r*. We also find that neutral rates co-vary negatively with public debt-to-GDP ratios.

Subject: Economic sectors, Financial crises

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/085
Stock No:

WPIEA2023085
ISBN:

9798400235245
ISSN:

1018-5941

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