Search Results
Journal Article
Underlying Trends in the U.S. Neutral Interest Rate
After a prolonged decline, U.S. inflation-adjusted interest rates have increased somewhat since the pandemic—possibly implying a higher new normal. As central banks attempt to tame the post-pandemic inflationary bout, whether real rates will fall back closer to pre-pandemic levels will ultimately depend on the trends in their long-term underlying determinants. Estimates suggest that the pre-pandemic downward pressures from global factors and from U.S. population aging have faded, while fiscal conditions continue to put upward pressure on U.S. real rates.
Working Paper
Demographics and Real Interest Rates Across Countries and Over Time
We propose that the natural rate of unemployment may have an active role in the business cycle, in contrast to a widespread view that the rate is fairly smooth and at most only weakly cyclical. We demonstrate that the tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We observe that evidence is weak about this basic point–the evidence neither comes close to rejecting the conventional view nor does it reject a very different view in which fluctuations in the natural rate are associated with a substantial fraction of cyclical ...