Low real rates as driver of secular stagnation: Empirical assessment

Jan Willem van den End, Marco Hoeberichts

Research output: Contribution to JournalArticleAcademicpeer-review


We empirically test whether there is a causal link between the real interest rate and the natural rate of interest, which could be a harbinger of secular stagnation if the real rate declines. Outcomes of VAR models for seven OECD countries show that a fall in the real rate indeed affects the natural rate. This causality is significant for Japan in all model specifications, for Canada, France, UK and Germany in some specifications and it is not significant for the US and Italy. The policy implication is that to avoid secular stagnation, expansionary monetary policy to reduce the real rate is less effective than policies aimed at raising the natural rate.
Original languageEnglish
Pages (from-to)29-40
Number of pages12
JournalJapan and the World Economy
Early online date9 Mar 2018
Publication statusPublished - Jun 2018


  • Financial markets and the macroeconomy
  • Interest rates
  • Monetary policy

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