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Covid-19 and the euthanasia of interest rates: A critical assessment of central bank policy in our times.
- Source :
-
Journal of Policy Modeling . Nov2021, Vol. 43 Issue 6, p1241-1258. 18p. - Publication Year :
- 2021
-
Abstract
- We compare the New Keynesian and Austrian explanations for low interest rates in the light of the Corona crisis. From a New Keynesian perspective low interest rates are the result of structural changes in the society and the economy as well as the cyclical downswing triggered by the Corona pandemic. In contrast, from the perspective of Austrian economic theory, interest rates have been pushed down on trend by central banks for a long time to stimulate growth, with the global financial crisis of 2007/08 and the Corona crisis of 2020 acting as powerful accelerators of the euthanasia of interest. New Keynesian theory would suggest that interest rates can be adjusted upward again when conditions change, without creating economic and financial disturbances. Against this, Austrian theory finds that central banks have backed themselves into a corner by creating persistent low-interest expectations. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 01618938
- Volume :
- 43
- Issue :
- 6
- Database :
- Academic Search Index
- Journal :
- Journal of Policy Modeling
- Publication Type :
- Academic Journal
- Accession number :
- 153977488
- Full Text :
- https://doi.org/10.1016/j.jpolmod.2021.04.004