Found 42 article(s) for author 'Interest Rates'

U.S. economy is just one bad recession away from zero rates or worse

U.S. economy is just one bad recession away from zero rates or worse. Lawrence Summers, October 14, 2019, Video, “The United States is just one bad recession away from being right back at zero interest rates or even lower, Larry Summers warned on CNBC on Monday. “It’s a very different world when everyone’s stuck at zero interest rates,” said Summers, a critic of President Donald Trump who served as former President Bill Clinton’s Treasury secretary and as an economic advisor for former President Barack Obama.Link

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Why does Jerome Powell have a haunted look?

Why does Jerome Powell have a haunted look? Carmen Reinhart, September 23, 2019, Opinion, “Once a year, the leadership of both the European Central Bank (ECB) and the United States Federal Reserve (Fed) go to the mountains for policy enlightenment. The ECB conducts a forum every June in Sintra, a town in the foothills of the eponymous Portuguese mountain range.  And the Fed convenes in late August in Jackson Hole, Wyoming, for the Kansas City branch’s economic symposium. In retrospect, this year’s….Link

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Larry Summers Says Central Bankers Confront a ‘Black Hole’ for Policy

Larry Summers Says Central Bankers Confront a ‘Black Hole’ for Policy. Lawrence Summers, August 22, 2019, Video, “Harvard University economist Lawrence Summers warned central bankers that they are staring at “black hole monetary economics” where small changes in interest rates and even more aggressive strategies do little to solve demand shortfalls.Link

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The Case for Implementing Effective Negative Interest Rate Policy

The Case for Implementing Effective Negative Interest Rate Policy. Kenneth Rogoff, April 24, 2019, Paper, “This paper explores the case for gradually instituting the changes necessary to implement unconstrained negative interest rate policy as a long-term solution to the zero bound on interest rates (or more precisely the near zero effective lower bound.) We shall argue that if negative interest rate policy can be implemented, it would be by far the most elegant and stable long-term solution to the severe limits on monetary tools that have emerged since the financial crisis. Admittedly, the question of how to resuscitate monetary policy is of more immediate relevance in Europe and Japan, where interest rates are already at the effective zero lower bound (in many cases mildly negative) a decade after the global financial crisis, and more than two decades after Japan’s financial crisis. But even the United States is likely to face severe constraints in the event of another financial crisis, possibly even in a deep recession.Link

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Negative Nominal Interest Rates and the Bank Lending Channel

Negative Nominal Interest Rates and the Bank Lending Channel. Lawrence Summers, January 2019, Paper, “Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data suggests that a policy rate of -0.50 percent increases borrowing rates by 15 basis points and reduces output by 7 basis points.Link

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Risks to the Global Economy in 2019

Risks to the Global Economy in 2019. Kenneth Rogoff, January 11, 2019, Opinion, “Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates, and a crescendo of populist economic policies.Link

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