Could there be a "Sub-market Interest Rate" in the IS-LM Framework?

Kui-Wai Li ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper attempts to make a case of “sub-market interest rate” using the IS-LM framework. The argument is that when the market interest rate falls below a certain level, the low cost of borrowing would invite speculative varieties or unproductive investment, which could eventually crowd out productive investment. As such, both monetary policy and fiscal policy may not be effective under certain circumstances.

Keywords: Interest rate; IS-LM; monetary policy (search for similar items in EconPapers)
JEL-codes: E4 E40 E43 E5 E52 (search for similar items in EconPapers)
Date: 2014-05-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:64653

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