The Low Interest Rates: a Legacy of the Financial Crisis or the Result of Something Else?

Sammanfattning: The 2008 Global Financial Crisis has come and gone. Since then, worldwide interest rates remain at an all-time low, yet economic growth remains sluggish. Theories have been put forward to explain the phenomena, two of which take a secular perspective, detached from the recent crisis. This paper employs an explorative style of examining two historical datasets with the staging point of the real interest rate levels, making it one of the more extensive overlooks of the real rate in both time and amount of countries. This paper finds that while the current period of low interest rates is neither exceptional in terms of length or severity, it stands unique in some regards. Notably, past episodes of low real interest rates have almost always coincided with significant increases in the rate of inflation, while the current bout of low real rates is occurring amidst lower than average rates of inflation. Even so, in many countries investment has weakened, savings has increased and policy rates were lowered to their limits since the crisis, all of which would contribute to lower real interest rates even in the absence of inflation.