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Policy Contribution

Low long-term rates: bond bubble or symptom of secular stagnation?

Yields on European sovereign bonds have reached historically low levels in 2016. This secular decline in long-term sovereign yields is not limited to the euro area. Why are interest rates currently so low? Are low long-term trates justified by fundamental factors or is it an artificial phenomenon?

By: Date: September 26, 2016 Topic: European Macroeconomics & Governance

Yields on European sovereign bonds have reached historically low levels in 2016. The goals of this paper are to understand why interest rates are currently so low and to determine if this level is justified by fundamental factors, or if rates are artificially low because of unconventional monetary policies.

The decline in yields over the last 30 years is the result of various factors: the fall in inflation, lower risk premia in European countries, and most importantly the fall in the real interest rate driven by a secular decline in the ‘neutral’ rate.

Consequently, central banks are not fully responsible for the actual level of long-term real rates, because they adopt, to fulfil their price stability mandates, the necessary policies to influence market rates in order to make them consistent with neutral rates, over which they have little influence.

Low rates are the symptoms of our diseases, not their cause. It is therefore crucial to tackle the structural causes behind the fall in long-term rates, but also to find solutions for the harmful consequences that lower equilibrium rates could have for the conduct of monetary policy.

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Europe and Japan: Monetary policies in the age of uncertainty

The 5th Bruegel - Graduate School of Economics, Kobe University conference will focus on monetary policy.

Speakers: Kosuke Aoki, Ulrich Bindseil, Zsolt Darvas, Ester Faia, Lex Hoogduin, Miles Kimball, Eric Lonergan, Tamotsu Nakamura, Athanasios Orphanides, Wataru Takahashi, Tokiko Shimizu and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
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By: Maria Demertzis Topic: European Macroeconomics & Governance Date: June 22, 2017
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By: Silvia Merler Topic: Global Economics & Governance Date: June 19, 2017
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External Publication

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By: Grégory Claeys, Sebastián Becerra and Juan Francisco Martínez Topic: Finance & Financial Regulation Date: June 7, 2017
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Policy Contribution

German Bundestag

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Past Event

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On 6 April Bruegel, as in previous years, hosted the presentation of the Euro Yearbook, a collection of experts’ insights on the construction of the European Monetary Union through 2016.

Speakers: Pablo Zalba Bidegain, Maria Demertzis, Fernando Fernandez, Javier Méndez Llera, Karl Pichelmann and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 6, 2017
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By: Benoît Coeuré Topic: European Macroeconomics & Governance Date: March 31, 2017
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Past Event

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Central bank communication in a low interest rate environment

At this event, we are pleased to welcome Mr. Benoît Coeuré, Member of the Executive Board of the European Central Bank at Bruegel.

Speakers: Benoît Coeuré and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 31, 2017
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