Discussion paper

DP18518 Global R*

This paper develops a structural model to study the global trend real interest rate, "Global R*". We focus on five potential drivers: productivity growth, population growth, longevity, government debt, and the relative price of capital. We employ a recursive simulation method in which beliefs about long-run trends are updated gradually. The simulations are guided by estimates of the global trend component of each driver derived from a panel dataset of 31 countries from 1950 to 2020. Global R* rises until the mid-1970s before declining by around 3 percentage points. The decline is driven by slowing productivity growth and increasing longevity.


Cesa-Bianchi, A, R Harrison and R Sajedi (2023), ‘DP18518 Global R*‘, CEPR Discussion Paper No. 18518. CEPR Press, Paris & London. https://cepr.org/publications/dp18518