Easy money policy
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An easy money policy is a
Effects
The most immediate effect of easy money, if implemented when the economy is below capacity, may be increased economic growth. In addition, the value of securities rises in the short term. If prolonged, the policy affects the business sentiment of firms and can reverse course over fears of rampant inflation. This is an effect of forward-looking expectations.[3]
Criticism
As a policy, easy money underpins the economic thought of
A study conducted by S.P. Kothari of the MIT Sloan School of Management, which looked at the growth rate of aggregated fixed investment by American companies between 1952 and 2010 found little evidence to support the notion that lowering short term interest rates stimulates corporate investment. His findings illustrate why reducing the Fed's policy of keeping low interest rates has not had the desired effect.[5]
See also
- Everything bubble
- Fed put
References
- ISBN 978-0-618-22647-4. Retrieved 4 April 2011.
- ^ "Easy Money Definition". www.investopedia.com. Retrieved May 5, 2014.
- ^ "The Motley Fool". wiki.fool.com. Retrieved May 5, 2014.
- ^ "Keynesian "Easy Money" is Nothing but Currency Devaluation". www.forbes.com. Retrieved May 5, 2014.
- ^ "Financial Executive: March 2013 - FEI". Archived from the original on 2014-05-05. Retrieved 2014-05-05. Retrieved on May 5, 2014