Safety, liquidity, and the natural rate of interest

Marco Del Negro, Domenico Giannone, Marc Giannoni and Andrea Tambalotti

No 812, Staff Reports from Federal Reserve Bank of New York

Abstract: Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest.

Keywords: natural rate of interest; r*; DSGE models; liquidity; safety; convenience yields (search for similar items in EconPapers)
JEL-codes: C11 C32 C54 E43 E44 (search for similar items in EconPapers)
Date: 2017-05-11
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

Downloads: (external link)
https://www.newyorkfed.org/research/staff_reports/sr812.html Summary (text/html)
https://www.newyorkfed.org/medialibrary/media/rese ... orts/sr812.pdf?la=en Full text (application/pdf)

Related works:
Journal Article: Safety, Liquidity, and the Natural Rate of Interest (2017)
Working Paper: Safety, Liquidity, and the Natural Rate of Interest (2017)
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:fednsr:812

Ordering information: This working paper can be ordered from
pipubs@ny.frb.org

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli (gabriella.bucciarelli@ny.frb.org).