Rajan on Interest-Rates

Rajan mentioned an important point which is missing here "two much low interest rates offers easy risk taking and inefficient firms would enter the market and their chances to fail later are more than efficient ones." I would like to differentiate between efficient and inefficient firms here and that is also in-terms of risk-capacity and exploiting a given situation, even a particular rate of interest (even high-interest-rates). The point is not only higher or lower interest rates. It is not difficult to find interest-rate-regimes with high interest rate and high investment in today's comparison. The point is making use of information and rational expectations theory. If a slight manipulation of expectations can get you results, what could be better than that? Efficient firms are normally better, than inefficient, on almost all the fronts. They have a capacity for higher initials investments and they can also invest in training and education. It happens. All the Central bank has to do is facilitate such actions and discourage excessive risk taking. I do not think there is a need to discourage? The Government can further motivate them in form of tax or tax breaks. Tax breaks? Not possible because of a greater need for fiscal consolidation voices. But, in form of lower taxes the Government can definitely help. I read about multiplier in the morning so it is fresh in my mind. Initial investment by a firm will create some multiple of investment in some other sectors of the economy and the tax-base would also be larger than today. Again, lower taxes would leave firm with more disposable profits/income which will be spent and again the multiplier will work. Means more large tax base. The Government can calculate the value of multiplier for next several periods that would help in the consolidation, and, also in finding the means and generating the means.