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Why Are Long-Term Interest Rates So Low?

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Abstract

Despite recent increases, long-term interest rates remain close to their historical lows. A variety of structural factors, notably slower productivity growth and a surplus of global saving, likely have lowered expectations of steady-state interest rates and pushed down long-term yields through the expectations component. In addition, accommodative monetary policy in the United States and abroad appears to have lowered the term premium on long-term bonds.

Suggested Citation

  • Michael D. Bauer & Glenn D. Rudebusch, 2016. "Why Are Long-Term Interest Rates So Low?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00114
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    1. Lukasz Rachel & Thomas Smith, 2015. "Secular Drivers of the Global Real Interest Rate," Discussion Papers 1605, Centre for Macroeconomics (CFM).
    2. Adrian, Tobias & Crump, Richard K. & Moench, Emanuel, 2013. "Pricing the term structure with linear regressions," Journal of Financial Economics, Elsevier, vol. 110(1), pages 110-138.
    3. Jens H. E. Christensen & Glenn D. Rudebusch, 2012. "The Response of Interest Rates to US and UK Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages 385-414, November.
    4. Thomas Laubach & John C. Williams, 2015. "Measuring the natural rate of interest redux," Working Paper Series 2015-16, Federal Reserve Bank of San Francisco.
    5. John C. Williams, 2016. "Monetary Policy in a Low R-star World," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    6. Unknown, 2005. "Forward," 2005 Conference: Slovenia in the EU - Challenges for Agriculture, Food Science and Rural Affairs, November 10-11, 2005, Moravske Toplice, Slovenia 183804, Slovenian Association of Agricultural Economists (DAES).
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    Cited by:

    1. Paul Hubert & Jérôme Creel & Christophe Blot & Fabien Labondance, 2017. "Are European bond markets overshooting?," SciencePo Working papers Main hal-03471799, HAL.
    2. repec:spo:wpmain:info:hdl:2441/5apvvnfh3490lodq3fuu3dbmjl is not listed on IDEAS
    3. repec:hal:spmain:info:hdl:2441/5apvvnfh3490lodq3fuu3dbmjl is not listed on IDEAS
    4. Kim, Daehwan & Moneta, Fabio, 2021. "Long-term foreign exchange risk premia and inflation risk," International Review of Financial Analysis, Elsevier, vol. 78(C).

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