Real interest rates and demographic developments across generations: A panel-data analysis over two centuries

Lucas Fuhrer and Nils Herger

No 2021-07, Working Papers from Swiss National Bank

Abstract: This paper empirically examines the effect of population growth on long-term real interest rates. Although this effect is well founded in macroeconomic theory, the corresponding empirical results have been rather tenuous and surprisingly unstable. As the demographic interest rate impact is theoretically based on intergenerational relationships, we not only contemplate gross population growth rates but also distinguish between demographic growth resulting from a birth surplus and net migration. Within a panel covering 12 countries and the years since 1820, our results suggest that there is a positive, statistically significant, and stable effect from the birth surplus on real interest rates. Conversely, the corresponding effect of net migration seems to be much more volatile. Hence, our results suggest that it is mainly population growth occurring through a birth surplus that affects the equilibrium real interest rate.

Keywords: Demographics; population growth; real interest rate (search for similar items in EconPapers)
JEL-codes: E43 E52 J11 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2021
New Economics Papers: this item is included in nep-age, nep-cba, nep-cwa, nep-his and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2021-07

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