Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128460
Authors: 
Hoffmann, Andreas
Schnabl, Gunther
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5754
Abstract: 
The paper analyses adverse investment, growth and distributional effects of ultra-loose monetary policies based on the monetary overinvestment theories of Hayek and Mises. We argue that ultra-loose monetary policies create incentives to substitute real investment by financial investment. When interest rates are expected to fall in the long term, the marginal and average efficiency of investments fall along, dampening GDP growth. We further show that the prolonged period of very low interest rates tends to distribute income towards higher income classes. This helps explain why consumer price inflation in most advanced economies does not pick up despite unprecedented monetary expansions.
Subjects: 
Hayek
Mises
monetary overinvestment theory
asymmetric monetary policy
financial crisis
marginal productivity of investment
secular stagnation
JEL: 
E52
E58
F42
E63
Document Type: 
Working Paper

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