Demographics and Real Interest Rates Across Countries and Over Time
Carlos Carvalho,
Andrea Ferrero,
Felipe Mazin () and
Fernanda Nechio
Additional contact information
Felipe Mazin: https://economics.sas.upenn.edu/people/felipe-mazin
No 2023-32, Working Paper Series from Federal Reserve Bank of San Francisco
Abstract:
We explore the implications of demographic trends for the evolution of real interest rates across countries and over time. To that end, we develop a tractable three-country general equilibrium model with imperfect capital mobility and country-specific demographic trends. We calibrate the model to study how low-frequency movements in a country's real interest rate depend on its own and other countries' demographic factors, given a certain degree of financial integration. The more financially integrated a country is, the higher the sensitivity of its real interest rate to global developments is, and the less its own real rate determinants matter. We then estimate panel error correction models relating real interest rates to many of its possible determinants-demographics included-imposing some restrictions motivated by lessons from our structure model. Results corroborate the importance of accounting for time-varying financial integration, and show global factors and life expectancy are relevant determinants of real interest rates.
Keywords: life expectancy; population growth; demographics; real interest rates; neutral rate; capital flows; secular stagnation (search for similar items in EconPapers)
JEL-codes: A11 E52 E58 J11 (search for similar items in EconPapers)
Pages: 40
Date: 2023-10-24
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-ifn, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/wp2023-32.pdf Full Text (text/html)
https://www.frbsf.org/research-and-insights/public ... tries-and-over-time/
Related works:
Working Paper: Demographics and Real Interest Rates Across Countries and Over Time (2023) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:97243
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().