Low real rates as driver of secular stagnation: Empirical assessment

Jan Willem End and Marco Hoeberichts ()

Japan and the World Economy, 2018, vol. 46, issue C, 29-40

Abstract: We empirically test whether there is a causal link between the real interest rate and the natural rate of interest, which could be a harbinger of secular stagnation if the real rate declines. Outcomes of VAR models for seven OECD countries show that a fall in the real rate indeed affects the natural rate. This causality is significant for Japan in all model specifications, for Canada, France, UK and Germany in some specifications and it is not significant for the US and Italy. The policy implication is that to avoid secular stagnation, expansionary monetary policy to reduce the real rate is less effective than policies aimed at raising the natural rate.

Keywords: Interest rates; Financial markets and the macroeconomy; Monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0922142518300240
Full text for ScienceDirect subscribers only

Related works:
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:eee:japwor:v:46:y:2018:i:c:p:29-40

DOI: 10.1016/j.japwor.2018.03.001

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().