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Artificially Low Interest Rates as Export Promotion Policy

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  • Yasunobu Tomoda
  • Hiroshi Kurata

Abstract

type="main"> We reconsider the effects of a policy that sets an artificially low interest rate. Such a policy involves a combination of an interest rate ceiling and a rationing rule that assigns a priority-lending status to export sectors over domestic service sectors. We demonstrate that the policy works as an export-promotion policy, and improves national income. Furthermore, under some conditions, the policy expands the domestic service sector, despite the reduced amount of funds owing to the rationing rule. Finally, the artificially low interest rate improves national welfare.

Suggested Citation

  • Yasunobu Tomoda & Hiroshi Kurata, 2015. "Artificially Low Interest Rates as Export Promotion Policy," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 550-565, December.
    • Handle: RePEc:bla:jecrev:v:66:y:2015:i:4:p:550-565
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    References listed on IDEAS

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