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Why an interest rate will cause economic buble?

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Question added by Ziad Abdat , TV, Audio, Video, Retail Planner , Samsung Elektronik Indonesia
Date Posted: 2016/03/02
Martijn Sinninghe Damste
by Martijn Sinninghe Damste , Manager Legal and Compliance, Secretary , China Construction Bank (Europe) S.A.

Low interest rates can make it attractive to invest in something with borrowed money. They can thus stimulate demand and under the right circumstances create an unstable economic equilibrium: despite price increases demand increases even faster because everybody expects to make a profit. Examples are share and housing bubbles. Thus, low interest can stimulate demand and therewith a bubble.

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