Long-term corporate and government bonds suffered four consecutive decades of negative real rates of return
beginning in the 1940s.
He demonstrates that three factors--bottom-up versus top-down approach, equal nominal versus equal real rates of return
across assets, and 28 versus 14 reproducible assets--account for more than 90 per cent of the difference in growth in capital service inputs.
While quantitative easing has fuelled rising stock markets as investors seek out positive real rates of return
, a lack of real confidence means that they are quick to correct in the face of perceived negativity.
If the real cost of borrowing is negative the government could borrow in order to finance real capital projects, yielding positive real rates of return
Our extension seeks to include monetary considerations to extend Mulligan's analysis and assess the inter-linkages between monetary factors, real rates of return
over the long run, and short-run real consumption preferences.
Suppose we also assume that (i) money and capital pay either the same real rate of return or closely related real rates of return
(1) and (ii) the real return on money is the negative of the net inflation rate [pi].
Similarly, cash remains vulnerable to negative real rates of return
given that current levels of inflation exceed short-term deposit rates in much of the developed and developing world.
HANIF AJARI: Household or consumer savings depend on many complex factors, the most important being income levels, relative price stability and positive real rates of return
Also, another future research may extend this analysis by exploring in more detail the implicit mechanisms between relative and absolute efficiency with real rates of return
Household savings depend on many complex factors, the most important being income levels, relative price stability and positive real rates of return
For others, like the US, future sacrifices are already required, most likely through a combination of higher inflation, austerity, and "financial repression," as governments seek to impose on savers negative real rates of return
Section 4 will focus on the multiplicative model which breaks up inflation from real rates of return
, whereas section 5 addresses a multiplicative model that pieces together returns with transaction costs.