{
  "title": "The Puzzle of Persistently Negative Interest Rate-Growth Differentials: Financial Repression or Income Catch-Up?",
  "publication": "IMF Working Papers, November 1, 2011",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-puzzle-of-persistently-negative-interest-rate-growth-differentials-financial-repression-25341",
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  "summary": "The interest rate-growth differential (IRGD) shows a marked correlation with GDP per capita. It has been on average around 1 percentage point for large advanced economies during 1999-2008; but below -7 percentage points among non-advanced economies - exerting a powerful stabilizing influence on gove",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The interest rate-growth differential (IRGD) shows a marked correlation with GDP per capita.\n- Average IRGD: around 1 percentage point for large advanced economies during 1999-2008.\n- Average IRGD: below -7 percentage points among non-advanced economies over the same period.\n- Large negative IRGDs exert a powerful stabilizing influence on government debt ratios."
    },
    {
      "heading": "Key findings",
      "content": "- Large negative IRGDs are largely due to real interest rates well below market equilibrium.\n  - Possible causes identified: financial repression and captive and distorted markets.\n- The income catch-up process plays a relatively modest role in explaining negative IRGDs.\n- Econometric analysis supports the conjecture that market distortions, rather than income catch-up, are the primary drivers of large negative IRGDs."
    },
    {
      "heading": "Econometric evidence (summary)",
      "content": "- Empirical results provide support for the view that real interest rates in non-advanced economies are depressed relative to market equilibrium.\n- The pattern of IRGDs correlates strongly with measures of financial development and market integration (as summarized in the authors' analysis)."
    },
    {
      "heading": "Implications and projections",
      "content": "- The IRGD in non-advanced economies is likely to rise with financial integration and market development.\n- This rise in IRGD is expected to occur well before GDP per capita converges to advanced-economy levels.\n- Rising IRGD implies a reduction in the powerful stabilizing influence negative differentials have had on government debt ratios in non-advanced economies."
    },
    {
      "heading": "Key statistics",
      "content": "- \"around 1 percentage point\" — IRGD for large advanced economies during 1999-2008.\n- \"below -7 percentage points\" — IRGD among non-advanced economies during 1999-2008.\n- \"1999-2008\" — period referenced for comparative IRGD averages.\n\nSource: IMF Working Paper \"The Puzzle of Persistently Negative Interest Rate-Growth Differentials: Financial Repression or Income Catch-Up?\" by Anna Shabunina, Julio Escolano, and Jaejoon Woo (November 1, 2011).\n\n---\n\n Content in this bundle\n\n- wp11260\n  - wp11260 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp11260 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-puzzle-of-persistently-negative-interest-rate-growth-differentials-financial-repression-25341"
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    "Authors: Anna Shabunina, Julio Escolano, Jaejoon Woo",
    "Published: November 1, 2011",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781463924553.001",
    "The interest rate-growth differential (IRGD) shows a marked correlation with GDP per capita.",
    "Average IRGD: around 1 percentage point for large advanced economies during 1999-2008.",
    "Average IRGD: below -7 percentage points among non-advanced economies over the same period.",
    "Large negative IRGDs exert a powerful stabilizing influence on government debt ratios.",
    "Large negative IRGDs are largely due to real interest rates well below market equilibrium.",
    "The income catch-up process plays a relatively modest role in explaining negative IRGDs.",
    "Econometric analysis supports the conjecture that market distortions, rather than income catch-up, are the primary drivers of large negative IRGDs.",
    "Empirical results provide support for the view that real interest rates in non-advanced economies are depressed relative to market equilibrium.",
    "The pattern of IRGDs correlates strongly with measures of financial development and market integration (as summarized in the authors' analysis).",
    "The IRGD in non-advanced economies is likely to rise with financial integration and market development.",
    "This rise in IRGD is expected to occur well before GDP per capita converges to advanced-economy levels.",
    "Rising IRGD implies a reduction in the powerful stabilizing influence negative differentials have had on government debt ratios in non-advanced economies.",
    "\"around 1 percentage point\" — IRGD for large advanced economies during 1999-2008.",
    "\"below -7 percentage points\" — IRGD among non-advanced economies during 1999-2008.",
    "\"1999-2008\" — period referenced for comparative IRGD averages.",
    "**_wp11260**"
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