Are lower interest rates really associated with higher growth?
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Are lower interest rates really associated with higher growth?
New empirical evidence on the interest rate thesis from 19 countries
By Kang-Soek Lee and Richard A. Werner
Wiley Online Library
First published: June 3, 2022
Since 2008, central banks have repeatedly reduced nominal policy interest rates, even to zero or negative territory, in an attempt to stimulate real economic activity. Meanwhile, bond yields have also fallen towards zero or beyond, at least partly influenced by central bank action. In May 2020, the UK government joined many European governments and Japan as it sold its first government bond with a negative yield. More recently, there are worries that rate rises may dampen economic growth. While such low or negative interest rates appear to have contributed to asset price bubbles, the impact on economic growth remains unclear.
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Do you think they’ll rewrite the economics textbooks? I doubt it.
I think they will. Takes time.