Living with Low for Long

I review the causes and some of the consequences of the recent decline in global real interest rates. Causes include: a higher propensity to save associated with a rise in the population share of the high‐saving middle‐aged; a weaker propensity to invest since the 2007–8 financial crisis; and portfolio shifts towards safer assets. Consequences include: an increased likelihood that policy rates are constrained by the zero lower bound, necessitating greater reliance on unconventional monetary policies; and an increased risk of financial instability as investors seek to generate higher yields.