## Crowding Out

Menzie Chinn:

Econbrowser: Portfolio Crowding Out, Illustrated: I have been updating graphs for my money and banking course... to illustrate the tremendous impact of government borrowing on interest rates via portfolio crowding out.... Oops. Well, the tremendous impact isn't showing up now. It might in the future. Although, it's useful to recall that the ten year interest rate is, under the expectations hypothesis of the term structure, the average of the expected short term interest rates over the next ten years.... One can localize the low interest rates by inspecting the interest rates of different maturities. For the next five years, we can look at the 5 year constant maturity rates.... On 9/22, the 5 year TIPS yield was 0.01%.