Low for (Very) Long? A Long-Run Perspective on r* across Advanced Economies
IMF Working Papers, April 21, 2023
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- Low for (Very) Long? A Long-Run Perspective on r* across Advanced Economies
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Bibliographic details
- Authors: Josef Platzer, Francesco Grigoli, Robin Tietz
- Published: April 21, 2023
- Series: IMF Working Papers
Summary
- New estimates of neutral interest rates (r*) for 16 advanced economies since the 1870s using the Laubach and Williams approach.
- Estimates differ substantially from commonly used proxies.
- Cross-country heterogeneity in r* was significant historically; since the 1980s the decline in r* has been common to many countries.
Major findings
- Traditional determinants such as population aging and productivity growth are strongly correlated with changes in neutral rates.
- The relative price of capital and inequality exhibit weak relationships with r*.
- Neutral rates co-vary negatively with public debt-to-GDP ratios.
Methodology
- Estimation approach: Laubach and Williams method applied to 16 advanced economies with data stretching back to the 1870s.
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- Working Paper