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The Malady of Low Global Interest Rates

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  • Tanweer Akram

Abstract

Long-term interest rates in advanced economies have been low since the global financial crisis. However, in the United States the Federal Reserve could begin to hike its policy rate, the federal funds target rate, before the end of the year. In the United Kingdom, the Bank of England could follow suit. What is the outlook for global long-term interest rates? What are the risks around interest rates? What can policymakers do to cure the malady of low interest rates? It is argued that global interest rates are likely to stay low in the remainder of this year and the first half of next year due to a combination of domestic and international factors, even if a few central banks gradually begin to tighten monetary policy. The cure for this malady lies in proactive fiscal policy and measures to support job growth. Boosting effective demand and promoting higher wages and real disposable income would help lift inflation rates close to their targets and raise long-term interest rates.

Suggested Citation

  • Tanweer Akram, 2015. "The Malady of Low Global Interest Rates," Economics Working Paper Archive wp_852, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_852
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    References listed on IDEAS

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    1. Mathew Forstater, 1998. "Flexible Full Employment: Structural Implications of Discretionary Public Sector Employment," Journal of Economic Issues, Taylor & Francis Journals, vol. 32(2), pages 557-563, June.
    2. Olson, Mancur & Bailey, Martin J, 1981. "Positive Time Preference," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 1-25, February.
    3. Tanweer Akram & Anupam Das, 2014. "Understanding the Low Yields of the Long-Term Japanese Sovereign Debt," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(2), pages 331-340.
    4. L. Randall Wray, 1998. "Understanding Modern Money," Books, Edward Elgar Publishing, number 1668.
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    Cited by:

    1. Tanweer Akram, 2019. "Prospects and Risks for the Global Economy in 2019," CPD Working Paper 130, Centre for Policy Dialogue (CPD).

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    More about this item

    Keywords

    Government Bond Yields; Global Interest Rates; Long-Term Interest Rates;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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