Claudio Borio, Piti Disyatat and Phurichai Rungcharoenkitkul attack the concept of a natural rate of interest in a new paper, published by the Bank for International Settlements.

In the working paper, the authors set out a model of a “finance-based” economy which can become trapped in a cycle of ever-decreasing rates.

They argue that far from being “neutral”, as in many models, monetary policy has a crucial impact on the long-term path of the economy, such that policy decisions today can tie