Abstract
AbstractThe natural rate of interest has attracted only minor empirical attention. The attention that it has attracted has been exclusively with Woodford’s equilibrium rate of interest rather than with Wicksell’s definition of the natural rate of interest as measured by the return on capital. Statistical offices in the US, the UK and Israel publish data for the return to capital. However, most don’t. National income accounting methods for measuring operating surpluses and capital are reviewed. Data from national statistical offices in several countries have been used to construct data on their returns to capital. These data show that ZIP, which was expected to boost investment and reduce the return to capital, failed to do so. Under the New Abnormal, a major disconnect between the natural and money rates of interest has emerged. There is an elephant in the room, which Neo-Wicksellians have ironically failed to notice.
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