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In this post, I very briefly summarize some of what I think are the most active debates in finance.
Low Interest Rates
Background
Interest rates have fallen everywhere, starting before the financial crisis and continuing after it. Furthermore, Interest rate are expected to stay low.
There are three main challenges posed by low interest rates:
- Less scope for monetary policy in recessions
- Increased financial stability risks through reaching for yield
- Possibility of demand shortfalls in normal times
This post by John Cochrane also provides a quick summary.
Key Questions
- What explains the recent fall in natural interest rates?
- How should monetary policy be conducted in a low interest rate world?
- How should fiscal policy be conducted in a low interest rate world?
- What are the economic consequences of low interest rates?