Applying more of the same medicine will not help

Michael Heise, Allianz Chief Economist on Janet Yellen’s announcement that negative interest rates might be a possible reaction to the current economic situation. 

 

In recent years we have been over-reliant on central banks. We cannot expect economic activity to increase just by applying more of the same medicine that hasn’t been effective so far. The effort of central banks to create growth and jobs and push up inflation to two percent has not succeeded. Monetary policy does not address the root causes. To increase productivity and growth, we need a handoff to other policy areas. For example, to encourage companies to invest their cash, spread technological innovation and education, governments should put more effort into improving the investment climate by implementing product and labor market reforms. Making interest rates negative will not solve the problem.

Michael Heise, Chief economist of Allianz.
Michael Heise, Chief economist of Allianz.

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