Real interest rates and demographic developments: the role of population growth and migration

Fuhrer, Lucas; Herger, Nils (2021). Real interest rates and demographic developments: the role of population growth and migration (SUERF Policy Brief 96). SUERF

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Over recent decades, real interest rates have declined in many countries. In the academic literature, the contemporaneous reduction in population growth has been considered a possible explanation for this decline. However, empirical studies have provided rather weak results supporting a strong and stable relationship. In a recent SNB working paper (Fuhrer and Herger, 2021), we highlight the importance of differentiating between population growth resulting from a birth surplus and net migration. We show that there is a positive, statistically significant, and stable effect from birth surplus on real interest rates. Conversely, the corresponding effect of net migration is more volatile.

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