Benel D. Lagua | Manila Bulletin | 27 October 2021
The New York Times article entitled, “The Puzzle of Low Interest Rates” by George Mankiw, a noted Harvard Professor, discussed the steady decline in interest rates over the past four decades in the U.S. According to the Fischer effect, the drop in inflation expectations resulted due to bond investors’ expectation of high inflation. They anticipate that repayment will be made in significantly less valuable dollars and they demand a higher interest rate to compensate.
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