Jason Lu is a second year PhD student in Economics at the University of Cambridge. Before studying Economics, he completed his Bachelor’s degree in Mathematics at Imperial College London. Following this, he came to Cambridge to undertake the Diploma in Economics as well as the MPhil in Economic Research before entering the PhD program. His current research focuses on understanding the causes behind the depth and the persistence of the Great Recession since 2008. In one paper he finds that the collapse of the housing bubble in 2007 likely played an important role in worsening the constraint of the Zero Lower Bound for monetary policy. Another project, joint with Professor Coen Teulings, shows that demography can explain the fall in the Full Employment Real Interest Rate since the early 1980s.
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The past 30 years has witnessed a worldwide decrease in real interest rates. We demonstrate that a large part of the fall in interest rates can be explained by changes in demography, which are as the result of a sudden fall in fertility rates across all of the advanced economies in the early 1970s.
Oral contraception created a population that, today, is disproportionately inclined to save, resulting in low to negative real interest rates. Excess eurozone savings can only be accomodated by raising sovereign debt levels