Global R*

Ambrogio Cesa-Bianchi, Richard Harrison and Rana Sajedi

No 18518, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Long-Run Interest Rates; Structural change; Macroeconomic policy (search for similar items in EconPapers)
JEL-codes: E22 E43 E60 (search for similar items in EconPapers)
Date: 2023-10
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