tag:blogger.com,1999:blog-2277215496195926573.post4970818705994958087..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Is the natural rate of interest really zero?Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2277215496195926573.post-62208110219650736462010-12-31T14:28:11.579-08:002010-12-31T14:28:11.579-08:00Ralph,
Thanks for the link to B Mitchells older b...Ralph,<br /><br />Thanks for the link to B Mitchells older blog on this. From your first link above:<br /><br />"It makes much better sense not to offer a support rate at all. In that situation, net public spending will drive the overnight interest rate to zero because the interbank competition cannot eliminate the system-wide surplus (all their transactions net to zero – no net financial assets are destroyed).<br /><br />So in pursuit of the “natural” policy goal of full employment, fiscal policy will have the side effect of driving short-term interest rates to zero. It is in that sense that modern monetary theorists conclude that a zero rate is natural.<br /><br />If the central bank wants a positive short-term interest rate for whatever reason (we do advocate against that) – then it has to either offer a return on excess reserves or drain them via bond sales.<br /><br />Our preferred position is a natural rate of zero and no bond sales. Then allow fiscal policy to make all the adjustments. It is much cleaner that way."<br /><br />So I interpret that perhaps they are saying that the natural rate should be zero for the risk free rate on overnight reserves. As excess reserves would be needed for full employment nearly in all potential real-world scenarios....Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-64393041067554552412010-12-24T00:57:37.152-08:002010-12-24T00:57:37.152-08:00Natural risk-less interest rate is zero. Nobody sa...Natural <b>risk-less</b> interest rate is zero. Nobody said anything about risky <b>market</b> rate.Игры рынкаhttps://www.blogger.com/profile/12001273098690387194noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-18026038388362454462010-12-18T09:02:52.848-08:002010-12-18T09:02:52.848-08:00Neil, Good point. But I think over and above that,...Neil, Good point. But I think over and above that, there is a sort of genetic or cultural desire amongst the Japanese to save more than others.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-17802097593646115952010-12-17T02:31:54.489-08:002010-12-17T02:31:54.489-08:00" But the Japanese are ultra enthusiastic sav..." But the Japanese are ultra enthusiastic savers: they are willing to lend their government very large sums at zero or near zero rates of interest."<br /><br />Surely it's a function of the export oriented nature of the economy. The only people who have Yen are the Japanese. Therefore they are the only people who can appear to 'save' in it. Really it is just Japanese names on the remaining stock of currency reserves.<br /><br />Import oriented countries will have more foreign people with their name on the stock of currency reserves, simply by nature of the direction of trade.Neil Wilsonhttps://www.blogger.com/profile/18178155357632397049noreply@blogger.com