 Covid-19 and the euthanasia of interest rates: A critical assessment of central bank policy in our timesThomas Mayer and Gunther Schnabl Journal of Policy Modeling, 2021, vol. 43, issue 6, 1241-1258 Abstract: We compare the New Keynesian and Austrian explanations for low interest rates in the light of the Corona crisis. From a New Keynesian perspective low interest rates are the result of structural changes in the society and the economy as well as the cyclical downswing triggered by the Corona pandemic. In contrast, from the perspective of Austrian economic theory, interest rates have been pushed down on trend by central banks for a long time to stimulate growth, with the global financial crisis of 2007/08 and the Corona crisis of 2020 acting as powerful accelerators of the euthanasia of interest. New Keynesian theory would suggest that interest rates can be adjusted upward again when conditions change, without creating economic and financial disturbances. Against this, Austrian theory finds that central banks have backed themselves into a corner by creating persistent low-interest expectations. Keywords: Mises; Hayek; Keynes; Hansen; Summers; Corona crisis; Secular stagnation; Aging societies; Global savings glut; Monetary policy; Central banks; Credit creation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:43:y:2021:i:6:p:1241-1258 DOI: 10.1016/j.jpolmod.2021.04.004 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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