tag:blogger.com,1999:blog-8702840202604739302.post4389951274001918140..comments2024-03-28T03:38:53.734-07:00Comments on MacroMania: Negative real interest ratesDavid Andolfattohttp://www.blogger.com/profile/12138572028306561024noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-8702840202604739302.post-56079757143487241462015-02-13T23:14:10.178-08:002015-02-13T23:14:10.178-08:00It is all about Interest Rates these days. Most ba...It is all about Interest Rates these days. Most banks fail to give more than 4% of the Interest for 6 months on the principal amount. This is actually a very small Interest rate. One way to get most out of the bank it is deposit as large sum as you can. <br /><br />Regards,<br />Apoorva<br />HCBL Bank - <a href="http://hcbl.in/" rel="nofollow">Tathastu</a>Anonymoushttps://www.blogger.com/profile/01628870659549741190noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-68969227371839437452013-11-24T07:22:36.864-08:002013-11-24T07:22:36.864-08:00This is really going to help me in the related stu...This is really going to help me in the related stuff..<br /><br /><b><a href="http://www.zeroaprcreditcards.net/about.html" rel="nofollow">0% APR</a></b> cardsAnonymoushttps://www.blogger.com/profile/17805099336273896163noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-86164887317335882402013-06-06T01:57:59.148-07:002013-06-06T01:57:59.148-07:00I like your blog.I like your blog.birkin baghttp://www.birkinhandbagoutlet.comnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-12873712391971581432013-05-10T04:00:43.252-07:002013-05-10T04:00:43.252-07:00A really helpful article - Thank you very much I w...A really helpful article - Thank you very much I wish you don't mind me writing about this post on my website I will also link back to this post Thanks<br />Stock investmenthttp://www.sanasecurities.comnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-87528391483578689232013-05-02T03:33:56.134-07:002013-05-02T03:33:56.134-07:00nice post...nice post...Pennsylvania Mortgage Rateshttp://www.hansenmtg.com/home.htmlnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-17539701506382510972011-11-30T09:21:30.285-08:002011-11-30T09:21:30.285-08:00I strongly, strongly suspect that the rise in real...I strongly, strongly suspect that the rise in real yields and associated decline inflation breakevens in the depths of the financial crisis is entirely explained by investors madly selling out of TIPS to buy nominal Treasuries. There is really very little information about inflation or economic expectations contained therein. Even though TIPS and Treasuries are both backed by the exact same full-faith and credit, TIPS are by magnitudes less liquid than nominal bonds. Thus, when liquidity became extremely prized, investors sold out of TIPS and bought nominal bonds. Hence, real rates spiked, nominal rates collapsed, and inflation expectations seemed to crash. Further evidence of this can be seen by looking at the on-the-run / off-the-run spreads of nominal bonds (again suggesting that liquidity was highly valued). In short - do not believe anything from the TIPS market in late 2008.Gabe C.noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-67997391830862798402011-11-09T18:38:07.558-08:002011-11-09T18:38:07.558-08:00JP Koning:
I mentioned in my post that the real r...JP Koning:<br /><br />I mentioned in my post that the real rate plays second-fiddle to the nominal rate. It is for the same reason that real variables are more important than nominal variables.<br /><br />Think of the real rate as measuring the relative scarcity of purchasing power across time. "Purchasing power" can be measured in any number of ways, but whichever way it is done, it is probably more meaningful than a measure of the relative scarcity of dollars across time.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-90060956413089516812011-11-09T13:55:10.806-08:002011-11-09T13:55:10.806-08:00"Perhaps not an ideal abstraction of the real..."Perhaps not an ideal abstraction of the real rate, as you say, but then, what do you recommend instead?"<br /><br />Why do we even need to have a variable that represent the "real rate"? I am having difficulty getting my head around this stuff.<br /><br />Your post was linked to at interfluidity:<br /><br />http://www.interfluidity.com/v2/2535.htmlJP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-31853811344984606262011-11-08T07:25:05.718-08:002011-11-08T07:25:05.718-08:00Ralph Musgrave: How do you think the real interest...Ralph Musgrave: How do you think the real interest rates plotted above might have evolved absent Fed intervention, and why?<br /><br />CL, the data is from FRED and Haver (gathered by my RA, Constanza Liborio). The graphics are constructed with Excel. <br /><br />Prof J, the Wicksellian "natural" rate of interest is a theoretical object, not an empirical object. I'm not sure how this measure of the real rate corresponds to Wicksell's natural rate. If I had to guess, I'd say that the two do not correspond. As per Ralph's comment above, some might hold the view that the real rate is currently below the natural rate, owing to Fed intervention.<br /><br />JP Koning, I'm not sure if "mythical" is the right word. But you are basically right. The problem is evident whenever we aggregate. What is one unit of real GDP, for example? Having said this, I have no problem in interpreting this measure of real interest rate as a weighted average of the own-rates that exist in the CPI basket of goods. Perhaps not an ideal abstraction of the real rate, as you say, but then, what do you recommend instead?David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-20852777238541830042011-11-07T14:22:58.053-08:002011-11-07T14:22:58.053-08:00i will third the question on the natural rate as a...i will third the question on the natural rate as a precursor to a question on negative natural rates! (c.f. http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/10/negative-natural-rates-of-interest-and-ngdp-targets.html)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-66800125875466432592011-11-07T07:16:10.144-08:002011-11-07T07:16:10.144-08:00"So, if the risk-free annual interest rate on..."So, if the risk-free annual interest rate on an inflation-indexed U.S. treasury is 2%, then one unit of output today is valued at 1.02 units of output in the future."<br /><br />There is something mythical about the real rate, right? First, there is no abstract unit of output with a unique real rate, only a number of goods, each with its own relative price (differential between its own spot and future price). And most of these relative prices are unobservable since futures markets exist for only a few commodities. <br /><br />We can pretend that the TIPS rate measures the real rate, but there is a specific non-zero risk of default built into the price of TIPS, and also some sort of liquidity premium. So TIPS are by no means an ideal abstraction of the real rate.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-64376145826706788552011-11-07T06:44:55.467-08:002011-11-07T06:44:55.467-08:00"When you say 'real' interest rate, h..."When you say 'real' interest rate, how similar is your understanding of the 'real' interest rate to a Wicksellian 'natural' interest rate? Do you think they are the same thing?"<br /><br />Yes, I second that question.<br /><br />Also: "The nominal interest rate is a relative price."<br /><br />This is an own-rate, right?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-90936953559571375622011-11-06T11:27:45.408-08:002011-11-06T11:27:45.408-08:00Prof J, sorry, misunderstood.Prof J, sorry, misunderstood.www.MiguelNavascues.comhttps://www.blogger.com/profile/00880006105532291958noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-57224001674361461842011-11-05T14:47:36.104-07:002011-11-05T14:47:36.104-07:00Luis,
It was a joke - my bonds lecture was in cla...Luis,<br /><br />It was a joke - my bonds lecture was in class to my private students. I didn't do a post about this issue on my by blog.<br /><br />I agree, St Louis Fred is wonderful.Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-5074636581992456022011-11-05T12:40:08.666-07:002011-11-05T12:40:08.666-07:00Prof J, I´ve been searching your graphs so similar...Prof J, I´ve been searching your graphs so similar to these of David, and I did not see them. <br />On the other hand, it is not so hard to do in Saint Louis Fed FRED. BTW, A GREAT and useful system to manage data. <br />The post is very nice, beutiful, and very clear. I agree, but I have a doubt: is not so important that the spread between risk free bonds (Treasury) and private bonds is in one of its highest level?www.MiguelNavascues.comhttps://www.blogger.com/profile/00880006105532291958noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-81281471664717919382011-11-05T05:58:06.242-07:002011-11-05T05:58:06.242-07:00CL,
David was clearly sitting in on my bonds lect...CL,<br /><br />David was clearly sitting in on my bonds lecture the other day... those graphs look suspiciously like my own. If he's anything like me, the data is from www.federalreserve.gov or the St. Louis Fed: http://research.stlouisfed.org/fred2/ and the program is Excel (2007, prob).<br /><br />David,<br /><br />When you say 'real' interest rate, how similar is your understanding of the 'real' interest rate to a Wicksellian 'natural' interest rate? Do you think they are the same thing?Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-7903569793704519262011-11-03T16:03:52.746-07:002011-11-03T16:03:52.746-07:00Just want to mention Lars E.O. Svensson have done ...Just want to mention Lars E.O. Svensson have done some major work in this area (actually the Swedish central bank was the first in the world to introduce negative interest rate in 2009). <br /><br />By the way, where do you get the data from and what program do you use to plot the graphs? Just wondering.CLnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-48639570136224394242011-11-03T12:59:13.147-07:002011-11-03T12:59:13.147-07:00Given the extent to which interest rates are manip...Given the extent to which interest rates are manipulated by central banks (and manipulated downwards in recessions), I’d question whether the current “low” rates are much of a guide as to how best to allocate resources.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com