have declined the greater income spreads are also visible in other ways. the trend towards increased saving has been so extensive that wealth has risen substantially in most industrial nations. wealth has also risen faster than the national income. 6 these increases in wealth are transferred and transformed into capital that is used in production. in most cases, this is done via the financial markets. the global real interest rate will in turn adapt so that the desired capital stock matches the available wealth. in recent decades, the upturn in wealth and capital in relation to national income has proved to be relatively greater than the downturn in the real interest rate. this has meant that the capital share of the added value ( the ratio between the real interest rate multiplied by capital and national income ) has risen despite the real interest rate declining. the capital share and the wage share always add up to one. consequently, wages share of added value has see piketty & zucman ( 2014 ). waldenstrom ( 2015 ) provides an account of the wealth / national income ratio in sweden. bis central bankers ’ speeches declined in many countries. 7 another way of expressing this is that such large real interest rate cuts have not been needed for capital to absorb the increase in wealth. and this in turn is due to the production technology used. following this discussion on what determines the development of the real interest rate in the long run, i shall now go on to discuss the inflation target, which is the other factor of significance for nominal interest rates in the longer run. inflation in the long run most of sweden ’ s most important trading partners have inflation targets in one form or another. usually, these are a target for the inflation rate of around 2 per cent a year, see table 1. more common for interest rate to be limited by lower bound when the long - term level of the global real interest rate is low, there is an increased risk that the nominal interest rate will reach its lower bound in future economic downturns. many have therefore argued in various contexts in favour of raising the inflation target. 8 this increases the distance to the nominal interest rate ’ s lower bound and makes it easier to stimulate the economy in a recession. at present, for instance, the bank of canada is reviewing the country ’ s inflation target, including an analysis of potential consequences of raising the inflation target. 9 if the nominal interest rate remains at zero, the real interest rate can be cut in the short term to a lowest level of – 2 per cent, with an

propensity to save in the world and thus to a lower real interest rate. see rogoff ( 2015 ). bis central bankers ’ speeches the demographic effect on saving in china is worth mentioning in particular. the single - child policy contributed to a severe decline in the birth - rate. at the same time, life expectancy increased. the combination of weak social safety net and fewer children to provide for the elderly was probably an important explanation for the increase in saving in the chinese economy. as china has become increasingly integrated into the global economy, saving in china has also been increasingly channelled to other parts of the world for investment. increased propensity to save in many emerging markets many other emerging markets have also increased their savings, but partly for other reasons than a change in demographics. experiences from the asian crisis in 1998 contributed to many emerging market countries ’ central banks building up their currency reserves to be able to withstand future currency outflows. the increased demand from these countries for low - risk assets, such as government bonds, led to yields being pushed down at the end of the 1990s and until the years prior to the financial crisis. the rising demand for safe assets also contributed to an increase in the differential between the risk - free rate and the rate on higher risk investments. more pensioners can in the long run lead to lower saving and thereby a higher real interest rate on the other hand, the saving may decline gradually as an increasingly large percentage if the world population attain the age of retirement. however the speed and strength of the impact that demographics will have on savings is uncertain. it depends partly on the extent to which older people choose to remain in work for longer and to what extent those who work save more for their retirement when their life expectancy rises. greater income disparities also affect propensity to save another factor that can explain why the propensity to save has increased is the increased income spread. in most developed countries, income spreads have increased since the 1980s. high - income earners normally have a higher propensity to save than low - income earners. the increase in the income spread could therefore have meant that saving has increased. at the same time, it should be said that even if income disparities have increased within a number of countries, they have declined on a global level in that the emerging markets are catching up with the developed economies. it is therefore difficult to say how global saving has been affected. wages as a share of added value