Monetary policy’s potency may wane over time – BIS paper
Low rates might cause aggregate demand to become less sensitive to monetary stimulus, authors say
Persistent low interest rates could make aggregate demand less sensitive to monetary stimulus, creating additional challenges for central banks, research published by the Bank for International Settlements finds.
Authors Rashad Ahmed, Claudio Borio, Piti Disyatat and Boris Hofmann examine panel data on 18 advanced economies starting in 1985. They find that not only are low rates associated with a steepening of the investment/saving curve, but this effect strengthens over time. A steeper IS
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