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Monetary Policy After the Coronavirus Crisis

In: The Austrian School of Economics in the 21st Century

Author

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  • Arkadiusz Sieroń

    (Uniwersytet Wrocławski)

Abstract

In response to the global coronavirus crisisGlobal coronavirus crisis, central banksCentral Banks all over the world have cut interest rates and introduced other measures to ease monetary policy. The aim of this chapter is to analyze this response, how it changed compared with their response to the global financial crisisGlobal financial crisis of 2007–2009, and how monetary policy might evolve further. In particular, I examine the adequacy of aggregate demand management and interest rate cuts in reference to the global coronavirus crisisGlobal coronavirus crisis and the potential economic impact of the interest rates staying lower for longer. I argue that setting interest rates too low for too long can impair their signaling and allocation functions and cause significant harm in the long run, such as misallocation of resources, excessive risk-taking, zombification of the economy, and accumulation of too much debt.

Suggested Citation

  • Arkadiusz Sieroń, 2022. "Monetary Policy After the Coronavirus Crisis," Contributions to Economics, in: Annette Godart-van der Kroon & Joseph Salerno (ed.), The Austrian School of Economics in the 21st Century, pages 177-190, Springer.
  • Handle: RePEc:spr:conchp:978-3-031-08502-4_8
    DOI: 10.1007/978-3-031-08502-4_8
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    More about this item

    Keywords

    Austrian economics; COVID-19 pandemic; Global coronavirus crisis; Global financial crisis; Ultralow interest rates;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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