OECD Economics Department Working Papers

ISSN: 
1815-1973 (online)
http://dx.doi.org/10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

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Factors behind the Decline in Real Long-Term Government Bond Yields You or your institution have access to this content

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Author(s):
Romain Bouis1, Kei-Ichiro Inaba1, Łukasz Rawdanowicz1, Ane Kathrine Christensen1
Author Affiliations
  • 1: OECD, France

13 Oct 2014
Bibliographic information
No.:
1167
Pages:
23
http://dx.doi.org/10.1787/5jxvgg7q1322-en

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This paper describes developments in real long-term interest rates in the main OECD economies and surveys their various determinants. Real long-term government bond yields declined from the 1980s to very low levels in the recent period, though they have not reached the historical lows of the 1970s. The decline in real interest rates has been driven by a combination of factors whose importance has varied over time. In the 1990s, the decline in inflation levels and in volatility was key. In the 2000s, purchases of US government bonds by official investors in emerging market economies, played an important role. More recently, quantitative easing and other unconventional monetary policy action, and possibly the Basel-III-induced increase in bank demand for safe assets, have been main drivers. Higher perceptions of risks after the last crisis do not seem to have put lasting downward pressures on government bond yields.
Keywords:
real interest rates, government bond yields, foreign exchange reserve accumulation, quantitative easing, monetary policy
JEL Classification:
  • E43: Macroeconomics and Monetary Economics / Money and Interest Rates / Interest Rates: Determination, Term Structure, and Effects
  • E58: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Central Banks and Their Policies
  • G15: Financial Economics / General Financial Markets / International Financial Markets
 
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