Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/213396
Authors: 
Palley, Thomas I.
Year of Publication: 
2018
Series/Report no.: 
FMM Working Paper No. 38
Abstract: 
This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest rigidity in that pre-Keynesian tradition. The paper argues negative nominal interest rates, even if feasible, may be unable to remedy Keynesian demand shortage unemployment, and might even aggravate the problem. That is because there exist non-reproduced assets whose return dominates that of investment, and saving may also increase in response to negative rates. Consequently, there may be no natural rate of interest.
Subjects: 
zero lower bound (ZLB)
natural rate of interest
non-reproduced assets
stagnation
New Keynesianism
nominal rigidities
JEL: 
E0
E10
E12
E20
E40
E50
Document Type: 
Working Paper

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