Some International Evidence on Inequality, Demographics, and Long-term Interest Rates*

Joshua Brault and Hashmat Khan ()

No 21-10, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: Using a cross-country panel spanning the years 1980-2019, we provide empirical evidence on the relationship between inequality, demographics, and declining long-term interest rates in OECD countries. Since the early 1980s, the OECD average long-term nominal interest rate has declined by 11%. We find that rising life expectancy can account for 3.15% of this decline, while rising inequality can account for 1.04%. We construct a real rate measure and find similar conclusions regarding the role of demographics versus inequality. Our evidence suggests that both inequality and demographics are relevant for delcining long-term interest rates.

Keywords: Inequality; Demographics; Long-term interest rates (search for similar items in EconPapers)
JEL-codes: E21 E43 J11 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2021-09-02, Revised 2021-12-16
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Published: Carleton Economics Papers

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