CHRONIC. By keeping interest rates low, central banks support jobs and growth, but encourage the purchase of speculative assets.
By Patrick Artus
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Lhe central banks in OECD countries are now keeping interest rates – both short-term and long-term – very low. For what reasons ? First of all because they all currently have the objective of contributing to job creation and obtaining an employment rate (fraction of the population of working age having a job) more raised. This implies that, even after several years of growth, when the unemployment rate is already low, they maintain a stimulating monetary policy that supports demand and pushes companies to hire low-skilled and / or poorly employable workers in normal times. This is called the “overheating policy”.
In addition, central banks are faced with public debt ratios …
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