Chart of the week: Eurozone: OE real neutral rate estimates

According to our new overlapping generations model, the Eurozone is stuck in secular stagnation leaving the ECB unable to hit the 2% inflation target in the foreseeable future. We find that secular demographic forces have been key to driving down real neutral interest rates. Based on our research, they hit -2% in 2018 and without a sharp increase in public debt levels or a major shift in demographics, they are likely to remain negative.

OE real neutral rate estimates

 

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