How long can interest rates remain low?

We live in extraordinary times. Real interests are negative, have been negative for several years and the forward guidance from central bankers suggests that they believe they are going to stay that way for several years to come. Yet this is a very unnatural state of affairs: the long run interest rate should roughly approximate the growth rate. Assuming that this is about two per cent then that too is roughly what the long run interest rate should be.

© Dieter Helm. All rights reserved.Copyright & Terms|Contact