We set up a life cycle model with real interest rate risk to demonstrate that real interest rates have implications for optimal household consumption and investments. Lower interest rates lead to higher optimal stock investments and lower consumption. Ignoring the time-varying nature of real...

Updated estimates of real equilibrium interest rates in the euro area, derived from eight prominent methodologies proposed in the academic literature, deliver a wide range of estimates, partly because they vary in time horizon and economic complexity. By the end of 2024, shorter-term equilibrium...

The natural rate of interest, often interpreted as the equilibrium real interest rate, serves as a critical benchmark for evaluating the stance of monetary policy. This paper investigates the natural rate of interest in Uzbekistan using three econometric approaches: the HLW-type model1 , a...

This paper studies how unemployment benefits affect aggregate outcomes through general equilibrium effects. First, we document that lower unemployment benefits tend to reduce the real interest rate in a structural vector autoregression with narrative sign restrictions. Young workers experience...

This study models a representative agent with generalized disappointment aversion preferences in an endowment economy. This model addresses the average upward slope in U.S. real bond yields, equity premium puzzle, and equity volatility puzzle. We integrate a two-state Markov switching process...

We argue that a long-term low real rate environment can increase labor income inequality, amplify the emergence of the working rich, and reduce intergenerational mobility. We provide a simple model with endogenous human capital accumulation and credit constraints to demonstrate this causal link....

This paper attempts to resolve several intriguing observations. First, there is an unusually high correlation between the inflation-protected and nominal interest rates when the changes in the nominal interest rates are predominantly driven by inflationary pressure. This observation appears to...

Long-term borrowing costs have been on a path of near continuous decline for the last several decades, with huge consequences for asset values, government finances, borrowers and savers. To shed light on why, we have estimated a global model that brings together an extensive set of drivers of...

We employ a new class of general equilibrium models with partially unfunded debt, as proposed in Bianchi et al. (2023), to study the relation between real interest rates and fiscal policy. Unfunded fiscal shocks generate a decline in real interest rates, while funded fiscal shocks cause an...

Recent inflationary trends have reignited debates about the natural real interest rate (r∗). This paper reviews the literature on estimating r∗ and its drivers, highlighting significant uncertainty and variability in estimates. The challenges in achieving consensus on r∗ is mostly due to...

The purpose of the study is to examine the Time deposit rate of Conventional and Islamic banks over the period of 2016 to 2020 the data consist of annual deposit rate and time deposit rate on the Financial Performance of the Banking Industry in Pakistan. The econometric and panel regression...

The acceleration of house price growth amidst falling interest rates to record-low levels across euro area countries between 2015 and 2021 has sparked renewed interest in the link between the two variables. Asset-pricing theory suggests that real house prices respond to changes in real interest...

The acceleration of house price growth amidst falling interest rates to record-low levels across euro area countries between 2015 and 2021 has sparked renewed interest in the link between the two variables. Asset-pricing theory suggests that real house prices respond to changes in real interest...

How do real interest rates affect financial fragility? We study this issue in a model in which bank borrowing is subject to rollover risk. A bank's optimal borrowing trades off the benefit from investing additional funds into profitable assets with the cost of greater risk of a run by bank...

Central banks wish to avoid self-fulfilling fluctuations. Monetary rules with a unit response to real rates achieve this under the weakest possible assumptions about the behaviour of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational...

The necessary adjustments to prominent measures of the neutral rate of interest following the COVID pandemic sparked a wide-ranging debate on the measurement and usefulness of r-star. Due to high uncertainty about relevant determinants, trend patterns and the correct estimation method, we...

This paper applies a recently developed method (Inoue and Rossi, 2021) to estimate functional inflation expectations and ex-ante real interest rate shocks, and then examines their macroeconomic effects in the context of a Functional Vector Autoregressive model with exogenous variables...

In this paper, I study the role of housing for wealth accumulation and the determination of the equilibrium real interest rate within a continuous-time overlapping generations model that incorporates a realistic demographic structure and households that save for life-cycle and bequest reasons....

We consider two possible approaches to the problem of incorporating explicit general (i.e., economic) inflation in the non-life claims reserve estimates and the corresponding reserve SCR, defined - as in Solvency II - under the one-year view. What we call the actuarial approach provides a...

This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-markets economy with wage rigidity. Monetary policy sets policy rates and alters the supply of reserves. These tools grant independent control over credit spreads and an interest...

In a recent paper "Stochastic Chain-Ladder Reserving with Modeled General Inflation", the effects of modeled general inflation on non-life claims reserving were studied using, along with the so called "market approach", a stochastic two-factor market model, characterized by deterministic...

This study aimed to examine the long and short-run relationships between credit market development and agricultural production using the Autoregressive Distributed Lags (ARDL) Bounds test for cointegration, as well as the direction of causality by using the Granger causality test. The results of...

Using data for the United States over the period 1973-2019, we find that there is a long-run stable relationship showing that the real interest rate is determined by real investment, real money supply, the velocity of circulation, and the rates of wages, economic growth, technological change,...

What can explain the long-term decline in equilibrium real interest rates? We analyze the importance of three of the most cited drivers; decreasing fertility, decreasing mortality, and a slowdown of technological growth. We do this through the lens of a general-equilibrium, two-country,...