Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of New York
Staff Reports
Safety, liquidity, and the natural rate of interest
Marco Del Negro
Domenico Giannone
Marc Giannoni
Andrea Tambalotti
Abstract

Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest.


Download Summary
Download Full text
Cite this item
Marco Del Negro & Domenico Giannone & Marc Giannoni & Andrea Tambalotti, Safety, liquidity, and the natural rate of interest, Federal Reserve Bank of New York, Staff Reports 812, 11 May 2017.
More from this series
JEL Classification:
Subject headings:
Keywords: natural rate of interest; r*; DSGE models; liquidity; safety; convenience yield
For corrections, contact Amy Farber ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal