Accommodative policies risk triggering interest rate traps: Norges Bank paper


Banks' desire for access to cheap liquidity may force central banks to keep interest rates too low for too long, according to a Norges Bank paper published on Monday.

Jin Cao and Gerhard Illing, the paper's authors, provide a framework for modelling the risk-taking channel of monetary policy to analyse how financial intermediaries' incentives for liquidity transformation are affected by the central bank's reaction to financial crisis. The authors say anticipating central banks' reaction to

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