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Negative nominal interest rates: history and current proposals

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  • Cordelius Ilgmann
  • Martin Menner

Abstract

Given the renewed interest in negative interest rates as a means for overcoming the zero bound on nominal interest rates, this article reviews the history of negative nominal interest rates and gives a brief survey over the current proposals that received popular attention in the wake of the financial crisis of 2007/08. It is demonstrated that taxing money proposals have a long intellectual history and that instead of being the conjecture of a monetary crank, they are a serious policy proposal. In a second step the article points out that, besides the more popular debate on a Gesell tax as a means to remove the zero bound on nominal interest rates, there is a class of neoclassical search-models that advocates a negative tax on money as efficiency enhancing. This strand of the literature has so far been largely ignored by the policy debate on negative interest rates.
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  • Cordelius Ilgmann & Martin Menner, 2011. "Negative nominal interest rates: history and current proposals," International Economics and Economic Policy, Springer, vol. 8(4), pages 383-405, December.
    • Handle: RePEc:kap:iecepo:v:8:y:2011:i:4:p:383-405
    DOI: 10.1007/s10368-011-0186-z
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    1. Flirt z ujemnymi stopami procentowymi
      by k.Ned in Obserwator Finansowy on 2015-01-05 07:59:22
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    Cited by:

    1. Martin Menner, 2011. ""Gesell Tax" and Efficiency of Monetary Exchange," Working Papers. Serie AD 2011-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Belke, Ansgar & Klose, Jens, 2013. "Modifying Taylor reaction functions in the presence of the zero‐lower‐bound — Evidence for the ECB and the Fed," Economic Modelling, Elsevier, vol. 35(C), pages 515-527.
    3. Khayat, Guillaume A., 2018. "The impact of setting negative policy rates on banking flows and exchange rates," Economic Modelling, Elsevier, vol. 68(C), pages 1-10.
    4. Arteta,Carlos & Kose,Ayhan & Stocker,Marc & Taskin,Temel, 2016. "Negative interest rate policies : sources and implications," Policy Research Working Paper Series 7791, The World Bank.
    5. Dermot Hodson, 2015. "Eurozone Governance: Deflation, Grexit 2.0 and the Second Coming of Jean-Claude Juncker," Journal of Common Market Studies, Wiley Blackwell, vol. 53, pages 144-161, September.
    6. Makoto Saito, 2021. "Central Bank Cryptocurrencies in a Competitive Equilibrium Environment: Can Strong Money Demand Survive in the Digital Age?," Advances in Japanese Business and Economics, in: Strong Money Demand in Financing War and Peace, pages 161-189, Springer.
    7. Petr Wawrosz & Semen Traksel, 2023. "Negative Interest Rates and Its Impact on GDP, FDI and Banks’ Financial Performance: The Cases of Switzerland and Sweden," IJFS, MDPI, vol. 11(2), pages 1-23, May.
    8. Degens, Philipp, 2013. "Alternative Geldkonzepte - ein Literaturbericht," MPIfG Discussion Paper 13/1, Max Planck Institute for the Study of Societies.
    9. Meixing Dai & Fanny Loux, 2017. "Les taux d’intérêt nominaux négatifs sont-ils efficaces pour relancer la croissance des crédits et de l’économie ?," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 36(1), pages 9-20, June.
    10. repec:zbw:rwirep:0343 is not listed on IDEAS
    11. Bucher, Monika & Neyer, Ulrike, 2014. "Der Einfluss des (negativen) Einlagesatzes der EZB auf die Kreditvergabe im Euroraum," DICE Ordnungspolitische Perspektiven 64, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Moid U. Ahmad & Hetti Arachchige Gamini Premaratne, 2018. "Effect of Low and Negative Interest Rates: Evidence from Indian and Sri Lankan Economies," Business Perspectives and Research, , vol. 6(2), pages 90-99, July.
    13. Freydorf, Christoph & Kimmich, Christian & Koudela, Thomas & Schuster, Ludwig & Wenzlaff, Ferdinand, 2012. "Wachstumszwänge in der Geldwirtschaft. Zwischenbericht der Wissenschaftlichen Arbeitsgruppe nachhaltiges Geld," EconStor Preprints 142471, ZBW - Leibniz Information Centre for Economics.
    14. Rehme, Günther, 2018. "On ‘Rusting’ Money Silvio Gesell’s Schwundgeld Reconsidered," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 106303, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    15. Anwar Khayat, 2015. "Negative Policy Rates, Banking Flows and Exchange Rates," AMSE Working Papers 1538, Aix-Marseille School of Economics, France, revised Sep 2015.
    16. Wenzlaff, Ferdinand & Kimmich, Christian & Koudela, Thomas & Richters, Oliver & Freydorf, Christoph & Schuster, Ludwig, 2012. "Wachstumszwang in der Geldwirtschaft? Theoretische Erwägungen," EconStor Research Reports 237053, ZBW - Leibniz Information Centre for Economics.
    17. Meier, Samira & Rodriguez Gonzalez, Miguel & Kunze, Frederik, 2021. "The global financial crisis, the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review," International Review of Law and Economics, Elsevier, vol. 65(C).
    18. Ahmed Anwar, 2020. "From Keynes' Liquidity Preference to Gesell's Basic Interest," Edinburgh School of Economics Discussion Paper Series 299, Edinburgh School of Economics, University of Edinburgh.
    19. Anwar Khayat, 2015. "Negative Policy Rates, Banking Flows and Exchange Rates," Working Papers halshs-01203609, HAL.
    20. Ansgar Belke & Jens Klose, 2012. "Modifying Taylor Reaction Functions in Presence of the Zero-Lower-Bound – Evidence for the ECB and the Fed," Ruhr Economic Papers 0343, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    21. Damir Tokic, 2017. "Negative interest rates: Causes and consequences," Journal of Asset Management, Palgrave Macmillan, vol. 18(4), pages 243-254, July.

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