Perspectives on High World Real Interest Rates
52 Pages Posted: 25 Jun 2004
Date Written: June 1986
Real interest rates in the United States have reached extremely high levels in the last several years. This surge in real rates at all maturities has not lacked explanations. Large current and prospective deficits, tight money, better profit prospects, financial deregulation, and increased uncertainty are among the factors than have been blamed for high real rates. If one looks only at the performance of the U.S. bond market, it is difficult to discriminate among possible explanations for the behavior of real interest rates. This paper examines the worldwide behavior of interest rates and the performance of other asset markets besides the U.S. bond market in order to better explain high real rates.
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