Join the Department of Economics for a critical discussion of the measurement of the natural rate of interest.
Speaker: Jonathon Hazell, London School of Economics
Abstract
Every month, a fraction of UK property leases are extended for another 90 years or more.
We use new data on thousands of these natural experiments from 2003 onwards to estimate the “natural rate of return on capital”, rK∗, which also represents the long- run dividend-price ratio.
rK∗ stays around 4.8% between 2003 and 2006, but starts to fall at the onset of the Great Recession, reaching a low of 2.3% in 2022. Real-time monthly data shows a modest uptick in rK∗ in 2023 thus far.
The natural experiment approach to measuring rK∗ is precise, avoids misspecification concerns and provides real-time estimates using publicly available data.
About the speaker
Jonathon Hazell is an Assistant Professor in Economics at the London School of Economics. He was awarded his PhD from MIT in 2020.
Jonathon's research interests lie in Macroeconomics and Macro-Finance, particularly in areas related to unemployment, wages, inflation and financial risks and returns.
His work has previously been published in the Quarterly Journal of Economics, Journal of Economic Theory and Journal of Labor Economics, amongst others.
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