Interest Rates and Macroeconomic Investment under Uncertainty
Ansgar Belke and
Matthias GÃ¶cke ()
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Matthias GÃ¶cke: Justus Liebig University Giessen, VWL IV, Licher Str. 62, D-35394 GieÃŸen
Credit and Capital Markets, 2021, vol. 54, issue 3, 319-345
The interest rate is generally considered as an important driver of macroeconomic investment characterised by a particular form of path dependency, â€œhysteresisâ€ . At the same time, the interest rate channel is a central ingredient of monetary policy transmission. In this context, we shed light on the issue (which currently is a matter of concern for many central banks) whether uncertainty over future interest rates at the zero lower bound hampers monetary policy transmission. As an innovation we derive the exact shape of the â€œhystereticâ€ impact of rate changes on macroeconomic investment under different sorts of uncertainty. Starting with hysteresis effects on the micro level, we apply an adequate aggregation procedure to derive the interest rate effects on a macro level. Our results may serve as a guideline for future central banksâ€™ policies on how to stimulate investment in times of low or even zero interest rates and uncertainty.
JEL-codes: C61 E22 E44 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:53:y:2021:i:3:p:319-345
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