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World real interest rates: a global savings and investment perspective

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  • Brigitte Desroches
  • Michael Francis

Abstract

Over the past 15 years, long-term interest rates have declined to levels not seen since the 1970s. This article explores possible shifts in global savings and investment that have led to this fall in the world real interest rate. There are several key findings. First, the authors identify the relative weakness in investment demand as more important than the relative increase in desired global savings to explain the decline in global interest rates. Second, the results indicate that the key factors explaining movements in savings and investment are variables that evolve relatively slowly over time, such as labour force growth and age structure. The conclusions suggest that over the coming years, world real interest rates are likely to continue to adjust slowly, reflecting long-term trends.

Suggested Citation

  • Brigitte Desroches & Michael Francis, 2010. "World real interest rates: a global savings and investment perspective," Applied Economics, Taylor & Francis Journals, vol. 42(22), pages 2801-2816.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:22:p:2801-2816
    DOI: 10.1080/00036840801964690
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    2. Steve Ambler & Craig Alexander, 2015. "One Percent? For Real? Insights from Modern Growth Theory about Future Investment Returns," e-briefs 216, C.D. Howe Institute.
    3. Amir Kia, 2020. "Impact of Public Debt, Deficit and Debt Financing on Private Investment in a Large Country: Evidence from the United States," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(2), pages 139-161, December.
    4. Aneta Risteska & Kosta Sotiroski & Miroslav Gveroski & Tatjana Spaseska & Fanka Risteska,, 2014. "Analysis Of Saving With The Population Of Republic Of Macedonia-Conditions And Perspectives," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 23-31, April.
    5. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Jannsen, Nils, 2009. "Global imbalances after the financial crisis," Kiel Policy Brief 7, Kiel Institute for the World Economy (IfW Kiel).
    6. Khaled Khaled & Amel Belanes & Sandrine Kablan, 2018. "The regional pricing of risk: An empirical investigation of the MENA Region," Economics Bulletin, AccessEcon, vol. 38(2), pages 751-760.
    7. Marc Lavoie & Mario Seccareccia, 2019. "Macroeconomics and natural rates: some reflections on Pasinetti’s fair rate of interest," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(2), pages 139-165, December.
    8. Guesmi, Khaled & Kablan, Sandrine & Belgacem, Aymen, 2015. "The regional pricing of risk: An empirical investigation of the MENA equity determinants," MPRA Paper 70271, University Library of Munich, Germany, revised 2015.
    9. Antony, Jürgen, 2009. "Capital/Labor substitution, capital deepening, and FDI," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 699-707, December.
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    11. repec:onb:oenbwp:y::i:139:b:1 is not listed on IDEAS
    12. Alan Greenspan, 2010. "La crisis," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 12(22), pages 15-60, January-J.
    13. repec:spo:wpmain:info:hdl:2441/5221 is not listed on IDEAS
    14. Faris Alshubiri, 2022. "The Impact of the Real Interest Rate, the Exchange Rate and Political Stability on Foreign Direct Investment Inflows: A Comparative Analysis of G7 and GCC Countries," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(3), pages 569-603, September.
    15. Tomura, Hajime, 2013. "Heterogeneous beliefs and housing-market boom-bust cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 735-755.
    16. Ignacio Hernando & Irene Pablos & Daniel Santabárbara & Javier Vallés, 2018. "Private saving. New cross-country evidencebased on bayesian techniques," Working Papers 1802, Banco de España.
    17. Abdulaziz Hamad Algaeed, 2017. "The Impacts of Non-linear Oil Price Shocks on Saudi Savinginvestment Behavior: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 155-165.
    18. Guido Baldi & Patrick Harms, 2017. "The Natural Rate of Interest and Secular Stagnation," DIW Roundup: Politik im Fokus 110, DIW Berlin, German Institute for Economic Research.
    19. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Jannsen, Nils, 2009. "Will global imbalances decrease or even increase?," Open Access Publications from Kiel Institute for the World Economy 32967, Kiel Institute for the World Economy (IfW Kiel).
    20. Bahadir, Berrak & Lastrapes, William D., 2015. "Emerging market economies and the world interest rate," Journal of International Money and Finance, Elsevier, vol. 58(C), pages 1-28.
    21. Josef C. Brada & Martin Mandel & Vladimír Tomšík, 2008. "Intertemporální přístup k platební bilanci: vztah míry úspor a míry investic v bohatých, chudých a tranzitivních ekonomikách [Intertemporal approach to the balance of payments: relationship between," Politická ekonomie, Prague University of Economics and Business, vol. 2008(2), pages 147-161.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F3 - International Economics - - International Finance

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