Zero interest rate policy
From Academic Kids
The zero interest rate policy (ZIRP) is Keynsian macroeconomics scheme for economies exhibiting slow growth with a very low interest rate, such as contemporary Japan. The Keynsian (and neo-Keynsian) thesis is that these countries are in the so-called liquidity trap, an assessment with which neoclassical economics disagrees.
Under ZIRP, the central bank maintains a 0% nominal interest rate, and then maintains inflation of the currency to make the value of otherwise stable investments, such as real estate, rise over time. It is effectively a way of imposing a negative interest rate.
For instance, with a 0% interest rate and 4% inflation rate, a house or commercial property will appreciate in value by 4% a year. This means that the return on the investment is calculated as if the interest rate is actually -4%.
The effect of a ZIRP policy is to encourage investment throughout the economy by making capital purchases more financially attractive. Whether ZIRP succeeds in achieving this goal is a matter of much debate.de:Zukunftsinitiative Rheinland-Pfalz fr:Zero interest rate policy
