Productivity Growth and Real Interest Rates in the Long Run

Kurt Lunsford

Economic Commentary, 2017, issue November

Abstract: Despite the unemployment rate's return to low levels, inflation-adjusted or \\"real\\" interest rates have remained negative. One popular explanation for persistently negative real interest rates is that long-run productivity growth has slowed. I study the long-run relationship between real interest rates and productivity growth from 1914 to 2016 and find a negative correlation between these two variables. Hence, low productivity growth has been historically associated with high real interest rates. Since World War II, the correlation between these variables has been near zero. This suggests that slow long-run productivity growth is not driving real interest rates to be persistently negative.

Keywords: unemployment rates; interest rates; productivity (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.clevelandfed.org/newsroom-and-events/p ... -rates-long-run.aspx Full text (text/html)

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:fip:fedcec:00083

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Commentary from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().