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The risks of a prolonged period of very low interest rates

Author

Listed:
  • Leonardo Gambacorta

    (Banca dei Regolamenti Internazionali)

Abstract

The presence of possible distortions caused by a prolonged period of low interest rates indicates that policymakers should raise interest rates as soon as macroeconomic conditions allow. Low interest rates are good for macroeconomic stability in the short run, but could harm long-run financial stability and macroeconomic performance because they tend to amplify risktaking, expose financial institutions to losses arising from a future tightening of monetary conditions and delay adjustment in their balance sheets.

Suggested Citation

  • Leonardo Gambacorta, 2011. "The risks of a prolonged period of very low interest rates," BANCARIA, Bancaria Editrice, vol. 1, pages 2-14, January.
    • Handle: RePEc:ban:bancar:v:01:y:2011:m:january:p:2-14
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    File URL: http://www.bancariaeditrice.it/prodotti/vedi/prodotto/id/2443/bancaria-n-1-2011
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    Cited by:

    1. Mortaza OJAGHLOU & Begum KAYA SOZTANACI, 2022. "Interest Rate Pass-Through and Monetary Transmission Mechanism in Turkey," Isletme ve Iktisat Calismalari Dergisi, Econjournals, vol. 10(1), pages 46-54.

    More about this item

    Keywords

    politica monetaria; tassi di interesse; crisi finanziaria;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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