Negative Nominal Interest Rates: Three ways to overcome the zero lower bound
AbstractThe paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying negative interest on currency by taxing currency; and (3) decoupling the numéraire from the currency/medium of exchange/means of payment and introducing an exchange rate between the numéraire and the currency which can be set to achieve a forward discount (expected depreciation) of the currency vis-a-vis the numéraire when the nominal interest rate in terms of the numéraire is set at a negative level for monetary policy purposes.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7346.
Date of creation: Jun 2009
Date of revision:
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Other versions of this item:
- Buiter, Willem H., 2009. "Negative nominal interest rates: Three ways to overcome the zero lower bound," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 213-238, December.
- Willem Buiter, 2009. "Negative Nominal Interest Rates: Three ways to overcome the zero lower bound," FMG Discussion Papers dp636, Financial Markets Group.
- Willem H. Buiter, 2009. "Negative Nominal Interest Rates: Three ways to overcome the zero lower bound," NBER Working Papers 15118, National Bureau of Economic Research, Inc.
- B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
- B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
- B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- G1 - Financial Economics - - General Financial Markets
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-11 (All new papers)
- NEP-CBA-2009-07-11 (Central Banking)
- NEP-MON-2009-07-11 (Monetary Economics)
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