1. Mawuli Koffi Gilbert Bossiade
Okuto Suzuki
Xinwei Xie
Chinmay Naik
Joseph Kong
Natalia Guerrero Maldonado
Team 7
Zero Interest Rates
and
QE are Ineffective Tools for Stimulating Economy.
3. Zero Interest Rate
● Macroeconomic concept of stimulating growth while
keeping interest rates close to zero
● It is used during recession
4. An unconventional monetary policy in which a central
bank purchases government securities or other securities
from the market in order to lower interest rates and increase
the money supply.
QE (Quantitative Easing)
6. Long Term
Argument 1: Short-term and Long-term
Impact
Inflation Up Government Debt Benefit don't outlast QE program
7. Negative Interest
Bank of Japan’s Attempt
Plan
・Weaken yen against USD
・Increase loans for businesses
・Foreign investments
・Increase capital investment
・Stimulate the economy
Result
・Stronger yen
・Stock price crash
・Slumping consumption
・Increased the investments in
governments bonds
・Caused negative bond interest
rates.
9. Argument 2: Increase Inequality
Widening the wealth gap
Fed’s low interest rates inflating stock market values,
housing and gold.
Benefited richer individual borrowers/investors. However, the wealth
gain did little to increase productive investment and consumption.
Fixed income receivers, savers without asset and creditors were
penalized.
10. Argument 3: Increases debt
• Increased debt puts stress on the economy. Government
will cut spending or increase tax to pay off debt which
lowers the productivity of the economy.
• Lowers the country’s reputation if debt is defaulted or other
countries lose confidence
11.
12. Conclusion
• Short-term and long-
term impact.
• Increase Inequality
• Increase Debt
• QE only stabilizes and not
stimulates economy
• More controlled approach
• Monetary policy not only
misallocated credit but also
redistributed wealth
• Lowers productivity of
economy
• Leads to higher interest rates
and crowding out (long-term)
