Regardless of what significance one attributes to the financial crisis, it is clear that the downward trend in interest rates began much earlier. Back in the period prior to the financial crisis, the Federal Reserve Governor of the time, Alan Greenspan, described the low longterm US interest rates as a mystery. Growth, savings and technology determine the real interest rate Regardless of which explanation one concurs with, most people consider the long-run global real interest rate to be primarily governed by expectations of potential growth, the propensity to save and technological advances. I will therefore first describe how the various factors can influence the real interest rate. I will then discuss possible explanations as to how growth, propensity to save and technology may change. Lower potential global growth gives lower global real interest rate According to economic theory, expected growth should play an important role for the development of the real interest rate; the lower the growth, the lower the real interest rate. International organisations such as the IMF and the OECD have made downward adjustments to their assessments of the global growth trend in recent years. This could lead to a lower real interest rate. At the same time, one can note that global growth was both stable and relatively high during the 15–20 years prior to the financial crisis. It is thus not possible to explain the long-term fall in interest rates prior to the financial crisis as due to lower global growth.
There is thus good reason to assume that demographical developments have contributed to an increased propensity to save in the world and thus to a lower real interest rate. 5  See Rogoff (2015). BIS central bankers’ speeches  3  The demographic effect on saving in China is worth mentioning in particular. The single-child policy contributed to a severe decline in the birth-rate. At the same time, life expectancy increased. The combination of weak social safety net and fewer children to provide for the elderly was probably an important explanation for the increase in saving in the Chinese economy. As China has become increasingly integrated into the global economy, saving in China has also been increasingly channelled to other parts of the world for investment. Increased propensity to save in many emerging markets Many other emerging markets have also increased their savings, but partly for other reasons than a change in demographics. Experiences from the Asian crisis in 1998 contributed to many emerging market countries’ central banks building up their currency reserves to be able to withstand future currency outflows. The increased demand from these countries for low-risk assets, such as government bonds, led to yields being pushed down at the end of the 1990s and until the years prior to the financial crisis. The rising demand for safe assets also contributed to an increase in the differential between the risk-free rate and the rate on higher risk investments.