Free exchange: How should recessions be fought when interest rates are low?

Posted: October 20, 2017 in economy
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Agreement on how to fight recessions in a low-interest-rate world remains elusive

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The low road

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Free exchange

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The right way to help declining places

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Free exchange

ONE day, perhaps quite soon, it will happen. Some gale of bad news will blow in: an oil-price spike, a market panic or a generalised formless dread. Governments will spot the danger too late. A new recession will begin. Once, the response would have been clear: central banks should swing into action, cutting interest rates to boost borrowing and investment. But during the financial crisis, and after four decades of falling interest rates and inflation, the inevitable occurred (see chart). The rates so deftly wielded by central banks hit zero, leaving policymakers grasping at untested alternatives. Ten years on, despite exhaustive debate, economists …

via Economic Crisis


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