An International Approach to the Neutral Interest Rate

Blanco, Andres

doi:10.29338/ph2024-07

Journal Article

An International Approach to the Neutral Interest Rate

Abstract: Following the COVID-19 recession, the US net international investment position, which is negative, declined to nearly 90 percent of national income. This decline coincided with an increase in long-term yields and a steady drop in net investment income. Increasing net savings is necessary to meet the US long-run budget constraint, suggesting that higher interest rates are needed to boost the net savings of US households and firms.

Keywords: neutral interest rate; current account; net saving rate;

JEL Classification: E24;

https://doi.org/10.29338/ph2024-07