Working Paper: Drivers of Real Interest Rates in A Two-country, General-equilibrium, OLG Model

Working Paper - March 2023 - No. 193

Authors Pedersen, Jesper (Formuepleje); Christensen, Frederik Bjørn (Copenhagen Business School)
Subject Models; Other economic analyses; International Economy; Danish Economy; Financial markets
Type Working paper
Year 2023
Published 9 March 2023
Abstract icon We examine drivers of the equilibrium real interest rate in a two-country, general-equilibrium, OLG model. The model predicts that population growth, growth in technology, and increased longevity have reduced the equilibrium real interest rate by 2.25 percentage points from 1950 until today – and that these factors will pull it down by further 0.25 percentage points towards 2050. Differences in longevity may explain the build-up of the large Danish net foreign asset position.