What caused the low interest rates of the early 2000s?

What caused the low interest rates of the early 2000s?

What caused the low interest rates of the early 2000s? Those low interest rates were an important factor in causing the housing bubble. There area two main views of the cause of the low interest rates. One view is that the Federal Reserve kept interest rates too low for too long. This view is held by Professor John Taylor (famous for the Taylor Rule). The other view, held by former FED Chair Ben Bernanke, is that a global savings glut caused the low interest rates. Assignment: Read the article (pp. 134-136) in the textbook Did a Global “Saving Glut” Cause the US Housing Boom? Explore Taylor’s argument that the FED was responsible (this will require web research).

 

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