The Long Covid Economy: Will the pandemic permanently change our society and investments?
Many Happy Returns
The Effects of Pandemics on Interest Rates
The natural rate of interest over the next 20 years is shifted down by 1.5 percentage points after a pandemic on average, according to an IMF study. This is because we've got less workers, but capital has survived, right? We've not destroyed our machinery, our crops, our infrastructure in a pandemic. However, with the war, what tends to happen is that in the 30 to 40 years after a major war, real interest rates are significantly elevated. So yeah, the idea is maybe COVID is more like a war than it is a pandemic, at least in its economic effects. And therefore, we might see higher interest rates long term.
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