The Determinants of U.S. Real Interest Rates in the Long Run

December 1, 1991

Preview Citation

Format: Chicago

Sharmini Coorey. The Determinants of U.S. Real Interest Rates in the Long Run, (USA: International Monetary Fund, 1991) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the factors which influence the behavior of real interest rates in the United States over the long run. Data on real and nominal returns to bonds and equities are tested for unit root non-stationarity. The results indicate that real and nominal interest rates and inflation are integrated of order one while the evidence on returns to equities is mixed. Short- and long-term real rates were found to be cointegrated with government deficits, government debt relative to GNP, private wealth, real balances relative to GNP, demographic factors and the marginal productivity of capital; demographic, fiscal, and monetary policy variables appear to be particularly significant.

Subject: Financial institutions, Financial services, Government debt management, Inflation, Prices, Production, Public financial management (PFM), Real interest rates, Stocks, Total factor productivity

Keywords: ADF statistic, ADF test, Federal budget, Government debt management, Inflation, Inflation rate, Physical capital, Real GNP, Real interest rate, Real interest rate processes, Real interest rates, Real rate of interest, Stocks, Total factor productivity, Weighted index, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/118
Stock No:

WPIEA1181991
ISBN:

9781451854053
ISSN:

1018-5941

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