The Savings-Ratio Behaviour in Globalised Money and Capital Markets: A Comparison of the UK and German Experiences
Deregulation, liberalisation and globalisation of financial markets in the 1980s and the 1990s has meant more reliance on prices (interest rates) as the clearing market mechanism. Moreover, central banks throughout the world are making much heavier use of interest rates to control monetary aggregates and the other ultimate targets of economic policy. These structural changes imply much larger volatility in interest rates than before which, in turn, causes a more stressful adjustment for the corporate, personal and financial sectors. This adjustment is not uniform. Small businesses are hit more than large ones, and the consumer is hit even harder when interest rates rise, thus raising general issues on the preferred method of the conduct of monetary policy and the effects of deregulation, liberalisation and globalisation.
KeywordsInterest Rate Monetary Policy Business Cycle Central Bank House Price
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