R* and the Global Economy

Reuven Glick

No 2019-18, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: This paper provides a synthesis of explanations for why the natural rate of interest, r*, has fallen over the last several decades. Demographic factors, declining productivity, slower output growth, and increasing inequality likely all have been important factors. Perhaps less recognized is the role of increasing global demand for safe assets, particularly by foreign investors. Suggestive empirical evidence is presented showing that foreign demand for U.S. safe assets, particularly government-provided assets, has increased dramatically, and may now be playing a much larger role in the determination of U.S. interest rates than in the past. In addition, the buildup before the 2007-2009 financial crisis of quasi-government and privately-supplied safe assets, held by both domestic and foreign investors, rendered the financial system more vulnerable to shocks that adversely affected the perceived degree of ?safeness? they provided.

JEL-codes: E43 E44 F34 F65 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-08-05
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.frbsf.org/economic-research/files/wp2019-18.pdf Full text (application/pdf)

Related works:
Journal Article: r* and the global economy (2020)
Working Paper: R* and the Global Economy (2019)
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:fedfwp:2019-18

Ordering information: This working paper can be ordered from
reference.library@sf.frb.org

DOI: 10.24148/wp2019-18

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library (reference.library@sf.frb.org).