ECONOMIES IN THE FACE OF NEAR-ZERO INTEREST RATES
ECONOMIES IN THE FACE OF NEAR-ZERO INTEREST RATES

Summary/Abstract: This paper examines the issue of ultra-low interest rates, which have become a key monetary policy tool in developed economies, particularly in response to financial crises. The aim of this study is to evaluate the effectiveness of ultra-low interest rates as a monetary policy instrument by examining their historical uniqueness and their relationship with economic growth and stock market performance in Japan, the United States, the United Kingdom, and the Eurozone. The historical review reveals that near-zero interest rates are indeed a rare phenomenon in global economic history, particularly when considered over centuries. The analysis of GDP growth and stock market performance during these periods shows that, contrary to expectations, near-zero interest rates do not consistently lead to economic recovery or enhanced corporate valuations. In fact, in three out of the four economies analyzed, GDP growth was weaker during periods of ultra-low interest rates, with Japan and the Eurozone showing particularly pronounced slowdowns. Similarly, stock market valuations grew more slowly, especially in Japan. These findings provide additional insights into the risks and challenges of relying on ultra-low interest rates as a policy tool.

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