Macroeconomic Policies in a Low Interest Rate Environment: Back to Keynes?

17 Pages Posted: 2 Mar 2018

See all articles by Efrem Castelnuovo

Efrem Castelnuovo

University of Melbourne - Department of Economics

Guay Lim

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Giovanni Pellegrino

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Date Written: March 2018

Abstract

This article discusses macroeconomic policies in a low interest rate environment, the central theme of the 2017 edition of the Melbourne Institute Macroeconomic Policy Meeting. After reviewing possible causes of the decline in interest rates observed since the 1990s, we present and discuss some of the challenges that monetary and fiscal policy face in a ‘new normal’ environment characterised by a real natural interest rate close to zero. Proposals by leading researchers on how to operate in such an environment are presented and discussed. We conclude by outlining some research questions that are highly relevant from a policy perspective.

Suggested Citation

Castelnuovo, Efrem and Lim, Guay and Pellegrino, Giovanni, Macroeconomic Policies in a Low Interest Rate Environment: Back to Keynes? (March 2018). Australian Economic Review, Vol. 51, Issue 1, pp. 70-86, 2018. Available at SSRN: https://ssrn.com/abstract=3132795 or http://dx.doi.org/10.1111/1467-8462.12258

Efrem Castelnuovo (Contact Author)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://https://sites.google.com/site/efremcastelnuovo/home

Guay Lim

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Giovanni Pellegrino

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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