IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Zero-Interest Rate Policy and Unintended Consequences in Emerging Markets

Listed author(s):
  • Andreas Hoffmann

    ()

Registered author(s):

    Since 2009, central banks in the major advanced economies have held interest rates at very low levels to stabilize financial markets and support the recovery of their economies. Based on a Mises-Hayek-BIS view on credit booms and Mises’ law of unintended consequences, this paper suggests that the prolonged period of very low interest rates in the large advanced economies (unintentionally) spurs volatile capital flows and fuels asset market bubbles in fast-growing emerging markets. The resulting inflationary pressure and risks of capital flow reversals gives rise to a new wave of interventionism as policymakers in emerging markets increasingly reintroduce financially repressive measures to isolate the economies from foreign capital inflows.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.biblioecon.unito.it/biblioservizi/RePEc/icr/wp2014/ICERwp02-14.pdf
    Download Restriction: no

    Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 02-2014.

    as
    in new window

    Length: 37 pages
    Date of creation: Feb 2014
    Handle: RePEc:icr:wpicer:02-2014
    Contact details of provider: Postal:
    Corso Unione Sovietica, 218bis - 10134 Torino - Italy

    Phone: +39 011 6706060
    Fax: +39 011 6706062
    Web page: http://www.esomas.unito.it/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Carmen M. & M. Belen Sbrancia, 2011. "The Liquidation of Government Debt," Working Paper Series WP11-10, Peterson Institute for International Economics.
    2. Olivier J Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," IMF Staff Position Notes 2010/03, International Monetary Fund.
    3. repec:pri:cepsud:114blinderreis is not listed on IDEAS
    4. Reinhart, Carmen & Reinhart, Vincent, 2010. "Diminished Expectations, Double Dips, and External Shocks: The Decade After the Fall," MPRA Paper 24969, University Library of Munich, Germany.
    5. M. Ayhan Kose & Christopher Otrok & Eswar Prasad, 2012. "Global Business Cycles: Convergence Or Decoupling?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 511-538, 05.
    6. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2010. "Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons," NBER Working Papers 16567, National Bureau of Economic Research, Inc.
    7. Richard Portes, 2012. "Monetary Policies and Exchange Rates at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 157-163, 02.
    8. Axel Leijonhufvud, 2009. "Out of the corridor: Keynes and the crisis," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 741-757, July.
    9. Reinhart, Carmen & Reinhart, Vincent, 1999. "On the use of reserve requirements in dealing with capital flow problems," MPRA Paper 13703, University Library of Munich, Germany.
    10. Thomas Laubach and John C. Williams, 2001. "Measuring the Natural Rate of Interest," Computing in Economics and Finance 2001 35, Society for Computational Economics.
    11. William R. White, 2006. "Is price stability enough?," BIS Working Papers 205, Bank for International Settlements.
    12. Ronald McKinnon & Gunther Schnabl, 2004. "The East Asian Dollar Standard, Fear of Floating, and Original Sin," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 331-360, 08.
    13. Hoffmann, Andreas, 2009. "An Overinvestment Cycle in Central and Eastern Europe?," MPRA Paper 15668, University Library of Munich, Germany.
    14. Keeler, James P, 2001. "Empirical Evidence on the Austrian Business Cycle Theory," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 14(4), pages 331-351, December.
    15. David Laidler, 2003. "The price level, relative prices and economic stability: aspects of the interwar debate," BIS Working Papers 136, Bank for International Settlements.
    16. Reinhart, Carmen, 2013. "Goodbye Inflation Targeting, Hello Fear of Floating? Latin America after the Global Financial Crisis," MPRA Paper 51282, University Library of Munich, Germany.
    17. Bordo, Michael D. & Meissner, Christopher M., 2012. "Does inequality lead to a financial crisis?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2147-2161.
    18. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
    19. Philip R. Lane & Peter McQuade, 2014. "Domestic Credit Growth and International Capital Flows," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 218-252, 01.
    20. Alejandro Jara & Ramon Moreno & Camilo E Tovar, 2009. "The global crisis and Latin America: financial impact and policy responses," BIS Quarterly Review, Bank for International Settlements, pages -, June.
    21. Andreas Hoffmann & Gunther Schnabl, 2009. "A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View," CESifo Working Paper Series 2855, CESifo Group Munich.
    22. Roger W. Garrison, 2004. "Overconsumption and Forced Saving in the Mises-Hayek Theory of the Business Cycle," History of Political Economy, Duke University Press, vol. 36(2), pages 323-349, Summer.
    23. Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan Standard," Working Papers 88, Princeton University, Department of Economics, Center for Economic Policy Studies..
    24. Reinhart, Carmen M., 2012. "The Return of Financial Repression," CEPR Discussion Papers 8947, C.E.P.R. Discussion Papers.
    25. Ronald McKinnon, 2010. "Rehabilitating the unloved dollar standard," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 1-18, November.
    26. Benn Steil, 2007. "Monetary Sovereignty as Globalization's Achilles' Heel," Cato Journal, Cato Journal, Cato Institute, vol. 27(2), pages -, Spring/Su.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:icr:wpicer:02-2014. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simone Pellegrino)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.