samlet årgang - Økonomisk Institut - Københavns Universitet

INTEREST-RATE DEVELOPMENT IN DENMARK 1875-2003 – A SURVEY 161
equal to a cross-country average 10-year-ahead real GDP growth trend (the »world
growth approach«). However, in practice the two sets of calculations show similar
results, 13 and they indicate a rather high degree of persistence in the expected inflation
rate compared to the development in the actual inflation rate. This could indicate the
presence of a very long learning process in the formation of inflation expectations.
Similar results for more recent periods are found in the case of Denmark, cf. e.g.
Christensen (1996) and Knudsen (2002) and the references therein. The relatively high
long-term real-interest-rate level during the late 1980s and the first half of the 1990s –
implied by the »traditional« measures in figure 3 – might, therefore, reflect a high
degree of persistence in inflation expectations.
4. Summary of the main findings
The aim of this article has been to paint a broad picture of the interest-rate development
in Denmark in the period 1875-2003.
In the period 1875-1945 the average short-term and long-term nominal interest-rate
level was around 4 to 5 per cent per annum. An upward trend in nominal interest rates
during the 1960s and 1970s was followed by a downward trend during the 1980s and
1990s. During the last five years (1999-2003) the average short-term and long-term
nominal interest-rate levels have again been around 4-5 per cent per annum.
Traditional measures of the ex ante real interest rate (nominal interest rate less the
contemporaneous rate of inflation) show the average short-term and long-term real
interest rates in Denmark to be around 3 per cent per annum for the period since 1875.
Furthermore, such calculations indicate a rather high long-term real-interest-rate level
during the late 1980s and the first half of the 1990s. However, the latter result may
reflect a high degree of persistence in inflation expectations.
13. Cf. also Bordo and Dewald (2001).
References
Abildgren, K. 2004a. A chronology of Denmark’s
exchange-rate policy 1875-2003,
Danmarks Nationalbank Working Paper,
No. 12, April.
Abildgren, K. 2004b. Nominal and real effective
krone rate indices for Denmark 1875-
2002, Danmarks Nationalbank Working
Paper, No. 13, April.
Abildgren, K. 2005. A historical perspective
on interest rates in Denmark 1875-2003,
Danmarks Nationalbank Working Paper,
No. 24, February.
Andersen, P. N. (ed.). 1947. Laanerenten i
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med særligt henblik paa renteudviklingen
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Barro, R. J. and X. Sala-i-Martin. 2004. Economic
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Bordo, M. D. and L. Jonung. 1997. The histo-