N° 52 Long - term Interest Rates in Advanced Economies: Recent Trends and Implications for Monetary Policy in Chile.
Authors: Elías Albagli

The Series of Economic Policy Papers of the Central Bank of Chile presents views and analyses of the Chilean economy and the conduct of monetary policy prepared by Bank authorities. This series, aimed at the general public, disseminates and discusses topics that are relevant to the goals and operations of the Central Bank.

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Information Brief

This document discusses recent trends in long-term interest rates in advanced economies. We argue that expectations of future short-term rates, as well as the term premium required by investors for holding long-term bonds, seem to be important for explaining the historically low levels of interest rates observed after the subprime crisis. We also discuss what the future might bring in terms of interest rate normalization, including some of the risks involved in the process. Finally, we present evidence about the link between interest rates in Chile and the United States, and analyze its implications for monetary policy.

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