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It's very interesting that Turkey is castigated for cutting interest rates. Yet they never mention the poster child of putting interest rates up. In Zimbabwe,
by neilwilson 4y ago
It's very interesting that Turkey is castigated for cutting interest rates.
Yet they never mention the poster child of putting interest rates up.
In Zimbabwe, which has followed the World Bank and IMF process, interest rates are 200% and inflation back at 280%.
There comes a point when we have to accept that interest rates don't really have that much power to control inflation in the real world. It's a religious devotion to a theoretical model.
- hammock 4y agoThe IMF process is to keep rates above inflation. So it seems Zimbabwe have some more hiking to do
- boole1854 4y ago> In Zimbabwe, which has followed the World Bank and IMF process, interest rates are 200% and inflation back at 280%. > There comes a point when we have to accept that interest rates don't really have that much power to control inflation in the real world. It's a religious devotion to a theoretical model. I don't understand how Zimbabwe's experience is a refutation of the 'theoretical model'. The model says that having nominal interest rates lower than the rate of inflation increases demand for loans, which increases the money supply, which increases inflation. If Zimbabwe's interest rate is 200% while inflation is 280%, then the model says inflation should continue to increase. Which is what it is doing.