On secular stagnation and low interest rates: Demography matters

Giuseppe Ferrero, Marco Gross and Stefano Neri

International Finance, 2019, vol. 22, issue 3, 262-278

Abstract: Nominal and real interest rates in advanced economies have been declining since the mid‐1980s and reached historically low levels after the outbreak of the global financial crisis. Understanding why interest rates have fallen is of utmost importance for monetary policy. This paper focuses on one of the factors contained within the ‘secular stagnation’ view: adverse demographic developments. The empirical analysis shows that these developments have exerted a downward pressure on real interest rates in the euro area in the last decade. Building on the projections of the dependency ratios produced by the European Commission, we show that the foreseen changes in the age composition of the population may continue exerting downward pressure on real interest rates.

Date: 2019
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Citations: View citations in EconPapers (21)

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https://doi.org/10.1111/infi.12342

Related works:
Working Paper: On secular stagnation and low interest rates: demography matters (2017)
Working Paper: On secular stagnation and low interest rates: demography matters (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:22:y:2019:i:3:p:262-278

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