Zero-Interest Rate Policy and Unintended Consequences in Emerging Markets

Andreas Hoffmann

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: Since 2009, central banks in the major advanced economies have held interest rates at very low levels to stabilize financial markets and support the recovery of their economies. Based on a Mises-Hayek-BIS view on credit booms and Mises’ law of unintended consequences, this paper suggests that the prolonged period of very low interest rates in the large advanced economies (unintentionally) spurs volatile capital flows and fuels asset market bubbles in fast-growing emerging markets. The resulting inflationary pressure and risks of capital flow reversals gives rise to a new wave of interventionism as policymakers in emerging markets increasingly reintroduce financially repressive measures to isolate the economies from foreign capital inflows.

Keywords: Monetary Policy; Emerging Markets; Financial Repression (search for similar items in EconPapers)
JEL-codes: B53 E32 E44 F41 F43 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.bemservizi.unito.it/repec/icr/wp2014/ICERwp02-14.pdf (application/pdf)

Related works:
Journal Article: Zero-interest Rate Policy and Unintended Consequences in Emerging Markets (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:02-2014

Access Statistics for this paper

More papers in ICER Working Papers from ICER - International Centre for Economic Research Corso Unione Sovietica, 218bis - 10134 Torino - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Daniele Pennesi ().