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How Lower Interest Rates Can Stall Growth

Based on BFI Working Paper No. 2019-09, “Low Interest Rates, Market Power, and Productivity Growth,” by Ernest Liu, postdoctoral student, Princeton University; Atif Mian, professor, Princeton University; and Amir Sufi, professor, UChicago’s Booth School of Business
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How Lower Interest Rates Can Stall Growth

A decrease in consumer demand reduces interest rates and leads to a decrease in productivity growth. A fall in interest rates can make the economy more monopolistic, meaning there are fewer competitors in a given industry, less innovation, and less productivity.