Global R*

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 12 July 2022

Staff Working Paper No. 990

By Ambrogio Cesa-Bianchi, Richard Harrison and Rana Sajedi

This paper develops a structural model to study the global trend real interest rate, ‘Global R*’. We focus on five potential drivers: productivity growth, population growth, longevity, government debt, and the relative price of capital. We employ a recursive simulation method in which beliefs about long-run trends are updated gradually. The simulations are guided by estimates of the global trend component of each driver derived from a panel data set of 31 countries from 1950 to 2020. Global R* rises until the mid-1970s before declining by around 3 percentage points. The decline is driven by slowing productivity growth and increasing longevity.

Global R*

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