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Interest Rates, Venture Capital, And Financial Stability, Hilary J. Allen
Interest Rates, Venture Capital, And Financial Stability, Hilary J. Allen
Articles in Law Reviews & Other Academic Journals
Following several prominent bank failures and as central banks continue to tighten interest rates to fight inflation, there is increasing interest in the relationship between monetary policy and financial stability. This Article illuminates one path through which the prolonged period of low interest rates from 2009-2021 has impacted financial stability: it traces how yield-seeking behavior in the wake of the Global Financial Crisis and Covid pandemic led to a bubble in the venture capital industry, which in turn spawned a crypto bubble as well as a run on the VC-favored Silicon Valley Bank. This Article uses this narrative to illustrate …