The substantial increase in saving in emerging market economies, especially China, in the middle of the first decade of the 21st century was responsible for more than half of the decline in real rates . This was only partly offset by the reduction in saving in advanced economies. High-income growth in emerging market economies during this period seems to have been the most important factor driving the increase in savings.
More than half of the reduction in real rates in the first decade of the 21st century can be attributed to an increase in the relative demand for bonds. This shift reflected an increase in the riskiness of equity combined with higher demand for safe assets among emerging market economies to increase official foreign reserves accumulation. In the aftermath of the global crisis, both reasons have continued to contribute to the decline in real rates, albeit more moderately now.
