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Figure 1. Effects on the Long-Run Equilibrium Federal Funds Rate

Percent
Bar Federal Funds Rate
Slower growth -1.15
Demographics -0.75
Lower investment -0.63
Slower foreign growth -0.31

Source: Calculations by Federal Reserve Board staff based on simulation results from the Board's FRB/US model. Details are provided in the appendix.

Figure 2. Long-Run Effects of Animal Spirits and Fiscal Policy on Interest Rates

Percent
Bar Federal Funds Rate
Higher investment 0.29
Higher government spending 0.50
Tax cut 0.41

Note: Shocks scaled to 1 percent of gross domestic product.

Source: Calculations by Federal Reserve Board staff based on simulation results from the Board's FRB/US model. Details are provided in the appendix.

Last Update: October 17, 2016