Impact of a Low Interest Rate Environment – Global Liquidity Spillovers and the Search-for-Yield

23 Pages Posted: 15 Aug 2013

See all articles by Ansgar Hubertus Belke

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Date Written: July 1, 2013

Abstract

On 10 January 2013 the ECB Governing Council decided “to keep the key ECB interest rates unchanged” based on an assessment of a 'contained' inflationary pressure and a weak economic activity, a contraction of real GDP in second and third quarter of 2012. Similar decisions have been taken by other leading central banks around the globe. This paper assesses and comments on several aspects of the implied low interest rate environment. It contains some general considerations with respect to the current low interest rate environment in advanced economies. It then deals with potential conflicts between monetary policy and financial stability in a low interest rate environment. Moreover, more practical implications for the necessity of supervision of pension funds and the insurance sector are derived. The paper also assesses the investment opportunities for retail investors in such an environment. Finally, we single out examples of main beneficiaries and losers from a low interest rate environment.

Keywords: Global liquidity, central banks and their policies, financial repression, low interest rates, insurance companies, pension funds

JEL Classification: E58, F33, G22, G23

Suggested Citation

Belke, Ansgar Hubertus, Impact of a Low Interest Rate Environment – Global Liquidity Spillovers and the Search-for-Yield (July 1, 2013). Ruhr Economic Paper No. 429, Available at SSRN: https://ssrn.com/abstract=2309963 or http://dx.doi.org/10.2139/ssrn.2309963

Ansgar Hubertus Belke (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

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