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The global saving glut and the fall in U.S. real interest rates: A 15-year retrospective

Author

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  • Robert Barsky
  • Matthew Easton

Abstract

The authors revisit Ben Bernanke’s global saving glut (GSG) hypothesis from 2005—which links low long-term real interest rates in the United States to excess saving in a number of non-Western countries, including, but not limited to, China. Using an analytical framework and empirical data, they find that the ability of the GSG hypothesis to explain the fall in long-term real rates between 2002 and 2006 is likely much greater than its ability to account for the further fall in these rates from the Great Recession onward.

Suggested Citation

  • Robert Barsky & Matthew Easton, 2021. "The global saving glut and the fall in U.S. real interest rates: A 15-year retrospective," Economic Perspectives, Federal Reserve Bank of Chicago, issue EP-2021-1, pages 1-15, March.
    • Handle: RePEc:fip:fedhep:91995
    DOI: 10.21033/ep-2021-1
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    References listed on IDEAS

    as
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    3. Bernanke, B.S., 2011. "International capital flows and the returns to safe assets in the United States 2003-2007," Financial Stability Review, Banque de France, issue 15, pages 13-26, February.
    4. Matthew Higgins & Thomas Klitgaard & Robert Lerman, 2006. "Recycling petrodollars," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Dec).
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    6. Lukasz Rachel & Lawrence H. Summers, 2019. "On Secular Stagnation in the Industrialized World," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 1-76.
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    More about this item

    Keywords

    global savings glut; saving and investment; current account; capital flows; long-term interest rates; real interest rates;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F00 - International Economics - - General - - - General

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