The author is indebted to J. Argyrou, P. Docherty, M. Lavoie, C. Panico, A. Stirati, A. Trezzini and two anonymous referees for comment, without thereby implicating them in the final product.
CAN (AND SHOULD) MONETARY POLICY PURSUE A ZERO REAL INTEREST RATE, PERMANENTLY?
Article first published online: 28 AUG 2011
© 2011 Blackwell Publishing Ltd
Volume 62, Issue 4, pages 635–655, November 2011
How to Cite
Aspromourgos, T. (2011), CAN (AND SHOULD) MONETARY POLICY PURSUE A ZERO REAL INTEREST RATE, PERMANENTLY?. Metroeconomica, 62: 635–655. doi: 10.1111/j.1467-999X.2011.04133.x
- Issue published online: 17 OCT 2011
- Article first published online: 28 AUG 2011
- (August 2010; revised June 2011)
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.