Current concerns about the zero bound on interest rates

WEA Pedagogy Blog

Much of the comments on the global financial and economic crisis have focused on the proximate causes and governance issues related to risk management, monetary policy and weak regulation. New political alignments allowed a process of global financial deregulations in the early 1970s. The political ascendancy of financial capital and extensive capital market liberalization, employment goals were abandoned in the economic policy agenda. Indeed,   price stabilization and “fiscal prudence” turned out to be the primary objectives of the economic policy. As a result, prior to the 2008 global crisis, inflation was low and close to official inflation target rates in the advanced economies. However, credit bubbles threaten the macroeconomic stability.

After the Global Crisis, academic economists and policy makers have actively participated in the debate on monetary policy in the United States and European Union. In the face of the outcomes of the crisis, central banks have dealt with a…

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