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Working Papers

Global Real Rates: A Secular Approach
Gourinchas, P.O., Rey, H., Sauzet, M.
  First Draft: 09 Nov 2016,

The current environment is characterized by low real rates and by policy rates close to or at their e ective lower bound in all major nancial areas. We analyze these unusual economic conditions from a secular perspective using data on aggregate consumption, wealth and asset
returns. Our present-value approach decomposes fluctuations in the global consumption-to wealth ratio over long periods of time and show that this ratio anticipates future movements of the global real rate of interest. Our analysis identi es two historical episodes where the consumption-to-wealth ratio declined rapidly below its historical average: in the late 1920s and again in the mid 2000s. Each episode was followed by a severe global nancial crisis and depressed real rates for an extended period of time. Our empirical estimates suggest that the
world real rate of interest is likely to remain low or negative for an extended period of time.

Gourinchas, P.O., Rey, H, and M. Sauzet, Global Real Rates: A Secular Approach, mimeo Berkeley and LBS, 2020.

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