Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018

Paul Schmelzing

No 845, Bank of England working papers from Bank of England

Abstract: With recourse to archival, printed primary, and secondary sources, this paper reconstructs global real interest rates on an annual basis going back to the 14th century, covering 78% of advanced economy GDP over time. I show that across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been ‘stable’, and that since the major monetary upheavals of the late middle ages, a trend decline between 0.6–1.6 basis points per annum has prevailed. A gradual increase in real negative-yielding rates in advanced economies over the same horizon is identified, despite important temporary reversals such as the 17th Century Crisis. Against their long-term context, currently depressedbsovereign real rates are in fact converging ‘back to historical trend’ — a trend that makes narratives about a ‘secular stagnation’ environment entirely misleading, and suggests that — irrespective of particular monetary and fiscal responses — real rates could soon enter permanently negative territory. I also posit that the return data here reflects a substantial share of ‘non-human wealth’ over time: the resulting R-G series derived from this data show a downward trend over the same timeframe: suggestions about the ‘virtual stability’ of capital returns, and the policy implications advanced by Piketty (2014) are in consequence equally unsubstantiated by the historical record.

Keywords: Real rate history; financial history; historical R-G; 13th–21st centuries (search for similar items in EconPapers)
JEL-codes: E40 G12 N10 N20 (search for similar items in EconPapers)
Pages: 110 pages
Date: 2020-01-03
New Economics Papers: this item is included in nep-his and nep-mac
References: View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0845

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