The KDI’s long-term projection method for real interest rate has been based on based on a regression that uses the marginal productivity of capital as an explanatory variable. This paper provides a theoretical background for the KDI’s projection method. In addition, as the decline in long-term interest rates was considered as an global and unexpected phenomenon, we argue that the projection method should be augmented to reflect this global trend at least for the near future.

Preface
Executive Summary

Chapter 1 Background and Objectives of the Study

Chapter 2 Theoretical Approach to Long-term Projections of Capital Returns
　Section 1 Neoclassical Economic Growth Model and Capital Returns
　Section 2 Relationship Between Demographic Changes and Capital Returns in the Life-cycle Overlapping Generations Model
　Section 3 Extensions of the Life-cycle Overlapping Generations Model and Implications for Long-term Projections of Capital Returns

Chapter 3 Decline in Global Real Interest Rates and Its Background
　Section 1 Trend Decline in U.S. Treasury Real Interest Rates
　Section 2 Background of the Global Decline in Real Interest Rates

Chapter 4 Existing Long-term Projection Methods for Real Interest Rates
　Section 1 Cases from International Institutions
　Section 2 Projection Methods of Domestic Institutions and Studies

Chapter 5 Directions for Improving Long-term Projection Methods for Real Interest Rates
　Section 1 Perspectives on Long-term Projection Methods for Real Interest Rates
　Section 2 Possibility of a Ponzi Scheme
　Section 3 Incorporating Short-term Projections in Long-term Projections

Chapter 6 Conclusion

References
Appendix
ABSTRACT