Is there an ‘interest rate–speculation’ relationship? Evidence from G7 in the pre- and post-2008 crisis

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

1 Scopus Citations
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Author(s)

  • Kui-Wai Li

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)2041-2059
Journal / PublicationApplied Economics
Volume49
Issue number21
Publication statusPublished - 3 May 2017

Abstract

The article revisits the IS-LM macroeconomic model by incorporating speculation into the investment function. The discussion is supported empirically by using data from the G7 countries to examine the different interest rate regimes in the pre- and post-2008 financial crisis. The estimation of an ‘anchor’ interest rate provides a reference rate for the G7 countries. The empirical study is extended to examine if the three quantitative easing (QE) episodes in the U.S. are growth promoting. The article concludes that the maintenance of a high and stable interest rate policy is needed for sustainable growth in the G7 countries.

Research Area(s)

  • contagion, Financial crisis, interest rate, monetary policy