Ungated Post | 19 Oct 2020

Chart of the week: Eurozone: OE real neutral rate estimates

Innes McFee

Innes McFee

Managing Director of Macro and Investor Services

According to our new overlapping generations model, the Eurozone is stuck in secular stagnation leaving the ECB unable to hit the 2% inflation target in the foreseeable future. We find that secular demographic forces have been key to driving down real neutral interest rates. Based on our research, they hit -2% in 2018 and without a sharp increase in public debt levels or a major shift in demographics, they are likely to remain negative.

OE real neutral rate estimates

 

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