Tuomas Malinen+ Your Authors @mtmalinen PhD econ. Chief Economist of GnS Economics. Adj. Professor of Economics @ Uni Helsinki. Economic growth, economic crises, monetary unions and central banks. Aug. 16, 2019 1 min read + Your Authors

The discussion about negative rates and the "natural interest rate" (central bank fairy) should be directed to its effects to

1) The banking sector, and
2) The real economy.

We already know that the effects to the banking sector have not been good. 👇1/

What is missing, however, is the understanding on its effects to the real economy.

We've tried to raise this awareness several times, lately in the March issue of our Q-Review. 👇 2/

The Bank of International Settlements (the 'central bank of central banks') have also raised alarms, as nicely summarized by @MishGEA. 3/

Two recent noticeable academic papers have also dealt with the issue:

Liu, Mian and Sufi (market concentration and productivity):  https://www.nber.org/papers/w25505 

Carletti and Ferrero (effects of NIRP environment):  https://www.dnb.nl/en/binaries/paper%20Carletti_Ferrero_18June2017_tcm47-360758.pdf 

Then there's the 'zombie issue'.

When bailouts and NIRP lead to unhealthy banking sector, as they have, it starts to feed unprofitable firms (to keep them from failing).

This stagnates productivity growth and creates a fragile #economy . 5/

Now, finally, economists and journalists should acknowledge the major risks of further central bank meddling.

The monetary experiment has failed and pushing it to its limits will only cause deeper economic malaise. 6/6
@CNBCJulianna @SaraEisen @dlacalle_IA @DiMartinoBooth

You can follow @mtmalinen.


Tip: mention @threader_app on a Twitter thread with the keyword “compile” to get a link to it.

Enjoy Threader? Sign up.

Since you’re here...

... we’re asking visitors like you to make a contribution to support this independent project. In these uncertain times, access to information is vital. Threader gets 1,000,000+ visits a month and our iOS Twitter client was featured as an App of the Day by Apple. Your financial support will help two developers to keep working on this app. Everyone’s contribution, big or small, is so valuable. Support Threader by becoming premium or by donating on PayPal. Thank you.

Follow Threader