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Past Interest Rates and Future Growth

Summary:
In studying the roots of macroeconomic trends across the advanced economies in recent decades, it is tempting to conclude that a declining rate of output growth is the inevitable result of deeper historical forces and intractable structural factors. But secular stagnation is well within our power to reverse. NEW YORK – A new chapter has been written in the history of risk-free global interest rates. In a recent study, Paul Schmelzing of the Bank of England tracks global real (inflation-adjusted) interest rates over the period from 1311 to 2018. Despite temporary stabilizations during the periods 1550-1640, 1820-1850, and 1950-1980, he finds that global safe real rates have persistently trended downward over the past five

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In studying the roots of macroeconomic trends across the advanced economies in recent decades, it is tempting to conclude that a declining rate of output growth is the inevitable result of deeper historical forces and intractable structural factors. But secular stagnation is well within our power to reverse.

NEW YORK – A new chapter has been written in the history of risk-free global interest rates. In a recent study, Paul Schmelzing of the Bank of England tracks global real (inflation-adjusted) interest rates over the period from 1311 to 2018. Despite temporary stabilizations during the periods 1550-1640, 1820-1850, and 1950-1980, he finds that global safe real rates have persistently trended downward over the past five centuries, and that negative safe real rates have steadily become more frequent since the fourteenth century.

In light of this historical record, Schmelzing questions the hypothesis, advanced by

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