Excess Savings Has Lowered Global Equilibrium Real Interest Rates: GS

An increase in the global propensity to save relative to the propensity to invest has lowered global equilibrium real interest rates over the past 25 years, notes Goldman Sachs.

Kevin Daly and team at Goldman Sachs in their “Global Economics Weekly” research report dated September 30, 2015 point out that global equity yields have risen significantly since 2000.

Real interest rates – Falling long-term real bond yields since mid-1980s

Daly and team recall the remarks of Ben Bernanke (2005) that an emerging-world ‘savings glut’ was responsible for the decline in real long-term government bond yields witnessed in developed economies from the early 1990s onwards. The following graph captures 10-year real, ex ante government bond yields for the U.S., Japan, UK and...