Are very low long-term interest rates conducive to long-term investment?
Long-term and very-long-term interest rates are currently very low in OECD countries. Is this conducive to long-term investment (in the energy transition, innovation, infrastructure, building renovation, etc.)? The analysis differs markedly between the demand side and the supply side of lending : On the demand sid e , the answer is yes: investment projects whose returns only appear in the long term can be carried out , whereas this is not the case in an environment of higher long-term interest rates; But on the supply side, the answer is no: long-term and very long-term interest rates do not cover interest rate risk, the risk of problems for the borrower, illiquidity risk, etc. This penalises credit supply for the private sector, but not the public sector, in particular because regulations encourage holdings of risk-free bonds and also because central banks have financed governments.