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Global R

Author

Listed:
  • Cesa-Bianchi, Ambrogio
  • Harrison, Richard
  • Sajedi, Rana

Abstract

This paper develops a structural model to study the global trend real interest rate, "Global R*". We focus on five potential drivers: productivity growth, population growth, longevity, government debt, and the relative price of capital. We employ a recursive simulation method in which beliefs about long-run trends are updated gradually. The simulations are guided by estimates of the global trend component of each driver derived from a panel dataset of 31 countries from 1950 to 2020. Global R* rises until the mid-1970s before declining by around 3 percentage points. The decline is driven by slowing productivity growth and increasing longevity.

Suggested Citation

  • Cesa-Bianchi, Ambrogio & Harrison, Richard & Sajedi, Rana, 2023. "Global R," CEPR Discussion Papers 18518, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18518
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    More about this item

    Keywords

    Long-Run Interest Rates; Structural change; Macroeconomic policy;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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