The natural rate of interest and secular stagnation

Bericht

In many advanced economies, there has been a declining trend in interest rates over the past thirty years. Since the financial crisis, interest rates have remained particularly low. Though a decrease in inflation explains part of the fall in nominal interest rates, there is also a clear downtrend in real interest rates. Against this backdrop, a debate has emerged over the factors that might have contributed to this decline. Potential persistent factors discussed under the heading of "secular stagnation" include a decline in profitable investment opportunities and high global savings rates. It is often argued that, due to these factors, the so-called natural interest rate, which is the level of interest rate consistent with stable, non-inflationary growth, has decreased. However, there are also arguments that the low interest rates are transitory and are due to factors such as post-crisis private debt deleveraging, a temporary "savings glut", or higher regulatory burdens for firms and households. This report summarizes the discussion on the underlying causes of the low interest rate environment and the potential for a period of secular stagnation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Roundup: Politik im Fokus ; No. 110

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baldi, Guido ; Harms, Patrick
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/155341
• Last update: 10.03.2025, 11:45 AM CET