A Note on the Real Effects of Interest Rate Policy and Its Impact on Inflation

Massimo Pivetti

Review of Political Economy, 2024, vol. 36, issue 2, 600-609

Abstract: The interest rate is viewed in this note as a monetary phenomenon, subject to a wide range of policy objectives and constraints, which contributes to determine activity levels principally through its effects on income distribution. The impact of interest-rate policy on inflation is also analysed, both in the light of the fact that the rate of interest constitutes a component of normal production costs and of the repercussions of its changes on employment. The note finally discusses the implications of the arguments put forward for the status of the central bank and capital control.

Date: 2024
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DOI: 10.1080/09538259.2023.2238997

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