Long-Run Determinants of the Real Interest Rate: An Investigation into the Impact of Secular stagnation and Increasing Levels of Debt

Sammanfattning

This thesis examines the impact of secular stagnation and increasing debt levels on real long-term interest rates by estimating a SVAR model for the US, UK, and Sweden between 1902 and 2020. The results of this thesis emphasize the impact of slow productivity growth in the decline of real long-term rates since the mid-1980s, with the evidence being quite strong for the US and UK, and somewhat weaker for Sweden. Estimates do, however, vary depending on which time period is being estimated, raising some concerns regarding the robustness of the results. The findings of this thesis suggest that policy should be supply-side oriented, focused on increasing productivity growth. Similarly, future levels of real long-term rates are argued to be dependent on how productivity evolves, with widespread implementation of artificial intelligence potentially raising real long-term rates in the future.