Real interest rates, exchange rates and the ZLB: on Secular Stagnation

Tinbergen Institute Discussion Paper 2018-032/VI

44 Pages Posted: 11 Apr 2018 Last revised: 28 Oct 2018

See all articles by Sweder van Wijnbergen

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 28, 2018


What are the drivers of low real rates? What are the implications of the Zero Lower Bound for economic policy? To discuss these questions we introduce a full general equilibrium model of the world economy within a simple (2 period) intertemporal structure. The model is simple enough to allow for full analytical solution yet sufficiently complex to allow us to address the impact of anticipated future productivity slow down, aging, structural reform and fiscal policy on real interest rates if markets clear and on aggregate economic activity if they do not (because of the ZLB). We extend both the equilibrium model and the ZLB variant to a more-goods-per-period structure to address (real) exchange rate policy and the macroeconomic impact of trade tariffs, like Trump's current trade war, on global economic activity.

Keywords: equilibrium real interest rates, aging, productivity change; the ZLB, real exchange rates, import tariffs

JEL Classification: E62, F13, F40, F41, H30

Suggested Citation

van Wijnbergen, Sweder, Real interest rates, exchange rates and the ZLB: on Secular Stagnation (October 28, 2018). Tinbergen Institute Discussion Paper 2018-032/VI. Available at SSRN: or

Sweder Van Wijnbergen (Contact Author)

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA

Centre for Economic Policy Research (CEPR)

United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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