Question

Central Banks have for at least 7 years followed a "loose" money policy with the goal...

Central Banks have for at least 7 years followed a "loose" money policy with the goal of keeping interest rates low. Three questions, is this a good policy why or why not, do you think it has been an effective policy, and what if any problems will develop as the Central Bankers switch to either "normal" monetary policy of a restrictive monetary policy?

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Answer #1

Loose interest rates are good policy regime but has its own drawback too. Firstly it helps achieve higher economic growth for nation and high liquidity into market. However issues like depreciation of currency and high inflation are some issues encountered. Its efficiency is seen as US grew much higher and transformed into robust economy after 2011 with low trade deficit and higher GDP per capita.

However rest rictive policies can hamper the economic growth suddenly but bring dollar appreciation.

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