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Negative interest rates: Causes and consequences


  • Damir Tokic

    () (International University of Monaco/INSEEC)


Abstract As of mid-2016, almost one-third of global economy has been affected by negative interest rates. Nevertheless, the prevailing opinion among influential policymakers has been that the nominal interest rates are essentially zero-bound. Thus, it’s not really clear what caused the recent breach of the zero percent level in many countries, and further, whether the US economy will also experience negative nominal interest rates. This article explains the following: (1) the arguments for the zero-bound on nominal interest rates, (2) the causes of the breach of the zero percent level, and (3) the implications for investors.

Suggested Citation

  • Damir Tokic, 2017. "Negative interest rates: Causes and consequences," Journal of Asset Management, Palgrave Macmillan, vol. 18(4), pages 243-254, July.
  • Handle: RePEc:pal:assmgt:v:18:y:2017:i:4:d:10.1057_s41260-016-0035-2
    DOI: 10.1057/s41260-016-0035-2

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    References listed on IDEAS

    1. Cecchetti, Stephen G, 1988. "The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates during the Great Depression," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1111-1141, December.
    2. 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.
    3. Marco Bassetto, 2004. "Negative Nominal Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 104-108, May.
    4. Rishi Goyal & Ronald McKinnon, 2003. "Japan's Negative Risk Premium in Interest Rates: The Liquidity Trap and the Fall in Bank Lending," The World Economy, Wiley Blackwell, vol. 26(3), pages 339-363, March.
    5. Miles S. Kimball, 2015. "Negative Interest Rate Policy as Conventional Monetary Policy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 234(1), pages 5-14, November.
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