Research Projects  

Monetary Overhangs, Financial Stability and Monetary Policy in a Low Interest Rate Environment - An Overinvestment View

The economic policy discussion concerning the reasons and therapies of past and future crisis has focused on monetary and fiscal stimulus (Spilimbergo et al. 2009, Krugman 2009), the provision of credit and more recently on increasing inflation (Blanchard et al. 2010, Krugman 2010). Whereas interest rate cuts and increasing government debt can ensure short-term macroeconomic stabilization, the long-term risks for financial, price and macroeconomic stability have been widely discussed, but have remained under-researched based on a coherent theoretical framework. The project aims to close this gap by analyzing the interdependence of financial stability, price stability and monetary policy (rules) based on the overinvestment and financial instability theories by Wicksell (1898), Mises (1912), Hayek (1929, 1931, 1937), Schumpeter (1912), and Minsky (1986, 1992).

The project entails three main innovations: It sets the current crisis therapies in a historical context confronting Keynesian policy approaches with Austrian policy approaches. Second, it is scrutinized based on the overinvestment theories how goods market focused monetary policy rules perform in a world of highly developed international financial markets. Third, the monetary and fiscal exit options are explored with focus on the overinvestment frameworks. The project aims to accompany the global return to more monetary, fiscal and financial stability to ensure a sustainable world growth performance.

The project was made possible by the funding of the "Stiftung Geld und Währung".

Research Platform Zero Interest Rate Policy and Economic Order

Further information on the research platform.


letzte Änderung: 04.01.2016