Determinants of long-term interest rates

Ona Ciocyte, Sander Muns, Marcel Lever

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Abstract

The nominal long-term interest rate decreased in the past decades due to the
decrease in (expected) inflation and in potential growth and due to changes in the age structure of the population. This conclusion is based on our survey of the literature and our empirical findings for the long-term interest rate in high-income countries since 1990. The relationship between nominal interest rates and macroeconomic fundamentals is relatively weak, as demonstrated by the low explanatory power of our regression analysis. The consensus is that the interest rate will somewhat recover, but not return to historical levels.
Original languageEnglish
Place of PublicationDen Haag
PublisherCPB
Number of pages34
Publication statusPublished - 27 May 2016
Externally publishedYes

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