A prolonged period of low interest rates in Europe: Unintended consequences

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F23%3A10251445" target="_blank" >RIV/61989100:27510/23:10251445 - isvavai.cz</a>
Alternative codes found
RIV/00216208:11230/23:10456214 RIV/61384399:31110/23:00058992
Result on the web
<a href="https://onlinelibrary.wiley.com/doi/full/10.1111/joes.12499" target="_blank" >https://onlinelibrary.wiley.com/doi/full/10.1111/joes.12499</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1111/joes.12499" target="_blank" >10.1111/joes.12499</a>

Result language
angličtina
Original language name
A prolonged period of low interest rates in Europe: Unintended consequences
Original language description
We examine the potential adverse effects of a prolonged period of low interest rates on financial stability from multiple perspectives. First, we provide a unique comparison of natural rates of interest estimated using two approaches-with and without financial factors-for six large European countries inside and outside the euro area. Second, we provide a comprehensive review of the empirical literature, allowing us to identify and categorize financial vulnerabilities, which may be created and fueled by low interest rates. Third, we discuss a situation in which a prolonged period of low interest rates may lead to a point of no return by contributing to higher indebtedness, overvalued asset prices and underpriced risks, resource and credit misallocation, and lower productivity. With respect to all of that, we offer a few monetary policy considerations. Specifically, we suggest that (i) monetary policy should act symmetrically over the medium to long term, (ii) both the short-term and long-term costs and benefits of pursuing accommodative or restrictive monetary policy should be accounted for, and (iii) monetary and macroprudential policies need to be coordinated, and their interactions should be accounted for in order to find the best policy mix for the economy.
Czech name
—
Czech description
—

Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50206 - Finance

Project
—
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2023
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Similar results(10)