Can (and Should) Monetary Policy Pursue a Zero Real Interest Rate, Permanently?

21 Pages Posted: 18 Oct 2011

See all articles by T. Aspromourgos

T. Aspromourgos

The University of Sydney - Discipline of Economics

Date Written: November 2011

Abstract

In the final chapter of the General Theory Keynes raises the possibility of instituting a permanent policy of very low interest rates, as part of his response to the deficiencies of mature capitalism. This paper examines the grounds for such a policy, in terms of both descriptive theory and normative principles. It then appraises the practicability of the policy in relation to three obstacles: the consequent need for an alternative policy instrument for targeting inflation; the possibility that cheap money might be a potent encouragement to speculation; and the constraints imposed on monetary policy choices by globally integrated financial markets.

Suggested Citation

Aspromourgos, Tony, Can (and Should) Monetary Policy Pursue a Zero Real Interest Rate, Permanently? (November 2011). Metroeconomica, Vol. 62, Issue 4, pp. 635-655, 2011. Available at SSRN: https://ssrn.com/abstract=1945611 or http://dx.doi.org/10.1111/j.1467-999X.2011.04133.x

Tony Aspromourgos (Contact Author)

The University of Sydney - Discipline of Economics ( email )

P.O. Box H58
Australia Square
Sydney, NSW 2006
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
330
PlumX Metrics