Ph.D. programme on global financial markets and international financial stability at Jena University and Halle University, Germany

Sonntag, 21. Dezember 2008

Need more arguments against ZIRP?

Zero Interest Rate Policy (ZIRP) may be doomed to fail in stimulating a stumbled economy. The reason is that at zero rates financial intermediaries are not inclined or able to raise funds and to lend them out. But it is exactly this kind of business what the Fed needs to get the economy back on track. As the FT reports, ZIRP has taken money market funds hostage-perhaps the only remaining intermediaries that, until recently, continued to create market liquidity.

2 Kommentare:

Martin Klein hat gesagt…

Nobel prize winner Paul Krugman on this subject: Gurk! ZIRP!

Martin Klein hat gesagt…

The article Repurchase Agreements with Negative Interest Rates from the New York Fed's publication Current Issues in Economics and Finance shows that interest rates on repo arrangements have occasionally been negative and explains why. Does this have bearing on your argument?