Tatom, John (2007): "Why Have Interest Rates Been So Low?".
Download (120kB) | Preview
This paper looks at interest rate developments in the US and argues that long-term real interest rates are at lows not seen in the past 50 years. It explores competing hypotheses that there is a global saving glut, there is conundrum or that global capital formation has slowed. The dominant view is a glut of saving, especially in China and Asia, that is depressing global real interest rates and boosting growth. While private sector capital formation remains at historic strong levels in the US, the same is not the case abroad. Unfortunately strong saving in China had not resulted in a boom in saving in Asia or globally. A decline in global capital formation is the proximate cause of depressed real interest rates. This is not a cyclical problem that is likely to go away with a rebound in economic activity in Asia or Europe. The implications for economic growth are dismal, despite notable exceptions in China and the US.
|Item Type:||MPRA Paper|
|Institution:||Networks Financial institute at Indiana State University|
|Original Title:||"Why Have Interest Rates Been So Low?"|
|Keywords:||interest rates; capital formation; saving|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth
|Depositing User:||John Tatom|
|Date Deposited:||16. Jul 2007|
|Last Modified:||12. Feb 2013 20:45|
Bernanke, Ben, “The Global Saving Glut and the US Current Account Deficit,” Sandridge Lecture, Virginia Association of Economists, Richmond, Va,, March 10, 2005, and Homer Jones Lecture, St. Louis, April 14, 2005.
Ferguson, Niall and Moritz Schularick, “Chimerical? Think Again,” Wall Street Journal, February 5, 2007.
Greenspan, Alan, “Testimony,” Monetary Policy Report to Congress, Board of Governors of the Federal Reserve System, Feb.16, 2005.
Summers, Lawrence H., “Reflections on Global Imbalances and Emerging Markets Reserve Accumulation,” L.K. Jha Memorial Lecture, Reserve Bank of India, March 24, 2006.
Tatom, John A., Not All Deficits Are Created Equal,” Financial Analysts Journal 62, No. 3 May/June 2006, pp. 12-19.
__________, “Investment and the New Energy Regime,” in Board of Governors of the Federal Reserve System, Public Policy and Capital Formation, April 1981, pp. 221-230.
Wilcox, James A., "Why Real Interest Rates Were So Low in the 1970s," American Economic Review, March1983, pp. 44-53.