Saturday June 6, 2020

Lower interest rates may cause more economic pain

With interest rates already extremely low, a further decline will have a negative economic impact via increased market concentration and lower productivity growth

18th September, 2019
Will ECB interest rate move work? Pic: Getty

Low interest rates have traditionally been viewed as positive for economic growth. But our recent research suggests that this may not be the case.

Instead, extremely low interest rates may lead to slower growth by increasing market concentration. If this argument is correct, it implies that reducing interest rates further will not save the global economy from stagnation.

The traditional view holds that when long-term rates fall, the net present value of future cash flows...

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