Safety, liquidity, and the natural rate of interest

Arbeitspapier

Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 812

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Quantitative Policy Modeling ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy
• Subject: natural rate of interest ; DSGE models ; liquidity ; safety ; convenience yield

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Del Negro, Marco ; Giannone, Domenico ; Giannoni, Marc P. ; Tambalotti, Andrea
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/189853
• Last update: 14.11.2023, 9:15 AM CET