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Unconventional monetary policy and negative interest rates: a Post-Keynesian perspective on the liquidity trap and euthanasia of the rentier

Author

Listed:
  • Olivia Bullio Mattos

    (Assistant Professor of Economics, St. Francis College, Brooklyn, NY, USA)

  • Felipe Da Roz

    (PhD Candidate, Universidade Estadual de Campinas (UNICAMP), Brazil)

  • Fernanda Oliveira Ultremare

    (Assistant Professor of Economics, Universidade Federal do Rio Grande do Sul (UFRGS), Porto Alegre, Brazil)

  • Guilherme Santos Mello

    (Associate Professor of Economics, Universidade Estadual de Campinas (UNICAMP), Brazil)

Abstract

This article discusses 'unconventional' monetary policy after the 2008 crisis. The focus is the original theoretical basis for such policy and possible Keynesian readings and criticisms. Drawing inspiration mainly from Keynes (1930; 1936) and Minsky (1975), the paper seeks to explain why ultra-low/negative interest rates neither caused 'rentiers' to die, nor achieved full employment. The main hypothesis goes in the direction pointed to by Keynes: the problem is the low marginal efficiency of capital, the liquidity trap, and the lack of active government fiscal policy, which should be used in conjunction with monetary policy that maintains low long-term interest rates in order to spur investment. Monetary policy and very low/negative interest rates seem insufficient to overcome low growth. They are also incapable, at least in the short term, of promoting euthanasia of the rentiers as current monetary policy allows financial institutions to benefit from the capital gains it spurs.

Suggested Citation

  • Olivia Bullio Mattos & Felipe Da Roz & Fernanda Oliveira Ultremare & Guilherme Santos Mello, 2019. "Unconventional monetary policy and negative interest rates: a Post-Keynesian perspective on the liquidity trap and euthanasia of the rentier," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(2), pages 185-200, April.
    • Handle: RePEc:elg:rokejn:v:7:y:2019:i:2:p185-200
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    Citations

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    Cited by:

    1. Tanweer Akram & Syed Al-Helal Uddin, 2021. "The Empirics of Long-Term Mexican Government Bond Yields," Economics Working Paper Archive wp_984, Levy Economics Institute.
    2. Tanweer Akram & Syed Al-Helal Uddin, 2021. "An empirical analysis of long-term Brazilian interest rates," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-20, September.
    3. Tanweer Akram & Huiqing Li, 2020. "Some Empirical Models of Japanese Government Bond Yields Using Daily Data," Economics Working Paper Archive wp_962, Levy Economics Institute.
    4. Tanweer Akram & Syed Al-Helal Uddin, 2020. "An Empirical Analysis of Long-Term Brazilian Interest Rates," Economics Working Paper Archive wp_956, Levy Economics Institute.
    5. Tanweer Akram & Huiqing Li, 2020. "The Empirics of UK Gilts' Yields," Economics Working Paper Archive wp_969, Levy Economics Institute.

    More about this item

    Keywords

    monetary policy; negative interest rates; liquidity trap; euthanasia of the rentier;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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