Report
Is it possible to live with interest rates that are far lower than the growth rate for a long time?
Since the late 1990s, Japan has had virtually zero interest rates, far lower than the growth rate; the euro zone will perhaps keep interest rates very low for a very a long time, markedly lower than the growth rate. Is it possible for a country to have interest rates that are far lower than its growth rate for a long time? Such a country will normally eventually be affected by: A household savings rate that is too low or too high (according to whether income effects or substitution effects dominate); An excessive level of investment, with inefficient investments; An abnormal rise in debt ratios; An abnormal rise in real estate and financial asset prices . In Japan, where interest rates have been markedly lower than growth since the late 1990s , the public debt has increased considerably , while in the euro zone, the fact that interest rates have been markedly lower than growth since 2014 has not had any significant effects .
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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