Does slower growth imply lower interest rates?

Sylvain Leduc and Glenn Rudebusch

FRBSF Economic Letter, 2014

Abstract: Over the past two years, both monetary and fiscal policy projections have been based on the view that declines in the long-run potential growth rate of the economy will in turn push down interest rates. In contrast, examination of private-sector professional forecasts and historical data provides little evidence of such a linkage. This suggests a greater risk that future interest rates may be higher than expected.

Date: 2014
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