The Sasin Research Seminar series continues with a study of Interest Rate fluctuations by Professor Dr. Michael Frenkel. The lecture is based on a research paper that asks, “Are (Real) Interest Rates Stationary in the Super-Long Run or Are They on a Continuous Decline?” The talk began by noting an observed decline in interest rates in recent years, which has been of concern to many, including economists, policymakers, and everyday savers. Similarly, the real interest rate – the nominal interest rate minus the inflation rate –, which is more crucial for economic decisions, has also declined. There is an ongoing debate about how a decline of real interest rates contradicts the Fisher effect, which states that “the nominal interest rate moves in tandem with the inflation rate such that the real interest rate remains unchanged”. This study uses a new dataset collected by Schmelzing (2020) to study the integration properties of the nominal interest rate and the inflation rate in eight countries from 1310 to 2018. The talk began with various graphs showing interest rates and inflation in Germany, the USA, the United Kingdom, and Japan from 1961 to 2021. Overall interest rates declined faster than inflation, which caused the real interest rates to fall. The lecture then moved on to Theoretical Considerations and examined several reasons for falling interest rates discussed in the literature. It was noted that these always involve a consideration of the equilibrium on the capital market. Dr. Frenkel briefly sketched the main arguments, looking at the interactions and effects of demography and capital supply, income growth in emerging markets, and income inequality and capital supply. More recent theoretical considerations include a decline in government investment activity and a decrease in global trend growth and demand for capital. However, he noted these concepts are somewhat controversial. Next, Dr. Frenkel looked at the empirical literature and found that although several papers have been published on the topic, evidence for the validity of the Fisher effect remains inconclusive. What has not been studied yet, and what this paper aims to rectify, is an econometric analysis of a very long dataset. The data set collected by Schmelzing covers the nominal interest rates and inflation rates of eight countries from 1310 to 2018. Dr. Frenkel illustrated the data for individual countries and the global aggregates. The graphs showed that there were periods of decline and stability. The conclusion was that the descriptive statistics are not convincing evidence of a secular decline in the real interest rate. Dr. Frenkel then explained the methodology used for a more formal analysis. If the real interest rate is indeed on a constant decline, as some of the graphs suggest, it has to be shown that the real interest rate in not stationary. This analysis focused on the stationarity properties of nominal interest rates and inflation rates, which then can lead to three cases. In the first case, both variables are stationary, which would result in the stationarity of the real interest rate, too and in the Fisher effect to hold. In the second case, only one of the two variables is stationary implying that the real interest rate is not stationary and the Fisher effect not to hold. In the third case, that both variables are non-stationary. If in this case the two variables are nevertheless cointegrated, the real interest rate is stationary, and the Fisher effect applies. The data was then examined and explained in a series of tables covering different time periods and subperiods. For the entire period from 130 to 2018, both nominal interest rates and inflation rates were found to be stationary. However, given some problematic issues resulting from a lack of data for certain periods, the analysis proceeded by investigating the period since around 1800 in more detail. The results indicate that nominal interest rates are not stationary and inflation rates are stationary, thereby implying that the Fisher effect does not hold. Subsequent rolling window stationarity tests revealed that the outcome is not consistent for all periods. Based on the observed changes of the stationarity properties of the inflation rates, the analysis proceeded by examining the period 1800-1913 and 1955 onward separately. The results showed that the nominal interest and inflation rates were stationary before 1914, implying that the Fisher effect holds. In the period post-1955, both variables were found not to be stationary in nearly all countries. However, for four countries (France, Italy, Spain, and the U.K.), the analysis pointed to cointegration implying that the Fisher effect holds. Hence, the analysis found no convincing evidence of a secular decline of real interest rates. The talk was followed by an interesting Q&A session that discussed the Fischer effect and other possible variables, such as the ‘Baby Boom’ after WW2 and periods of increased activity.