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Negative Interest Rate Policy as Conventional Monetary Policy

Author

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  • Miles S. Kimball

Abstract

As long as all interest rates move in tandem – including the rate of return on paper currency – economic theory suggests no important difference between interest rate changes in the positive region and interest rate changes in the negative region. Indeed, in standard models, only the real interest rate and spreads between real interest rates matter. Thus, in most respects, negative interest rate policy is conventional. It is only (a) what needs to be done with paper currency, (b) difficulties in understanding negative rates or (c) institutional features interacting with negative rates that make negative interest rate policy unconventional.

Suggested Citation

  • 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.
    • Handle: RePEc:sae:niesru:v:234:y:2015:i:1:p:r5-r14
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    Cited by:

    1. D’Hondt, Catherine & De Winne, Rudy & Todorovic, Aleksandar, 2021. "Target Returns and Negative Interest Rates," LIDAM Discussion Papers LFIN 2021011, Université catholique de Louvain, Louvain Finance (LFIN).
    2. Gerasimos T. SOLDATOS, 2017. "A formal look at the negative interbank rate," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 261-266, Spring.
    3. Dominika Kolcunova & Tomas Havranek, 2018. "Estimating the Effective Lower Bound on the Czech National Bank’s Policy Rate," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(6), pages 550-577, December.
    4. Anand, Abhishek & Chakraborty, Lekha S, 2019. "Impact of Negative Interest Rate Policy on Emerging Asian markets: An Empirical Investigation," MPRA Paper 99426, University Library of Munich, Germany, revised 2020.
    5. Schilirò, Daniele, 2020. "COVID-19 crisis and the public debt issue:The case of Italy," MPRA Paper 103997, University Library of Munich, Germany, revised Nov 2020.
    6. Kimball, Miles, 2017. "Next generation monetary policy," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 100-109.
    7. Corneille, O. & D’Hondt, C. & De Winne, R. & Efendic, E. & Todorovic, A., 2021. "What leads people to tolerate negative interest rates on their savings?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    8. Gerasimos T. SOLDATOS, 2017. "A formal look at the negative interbank rate," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 261-266, Spring.
    9. Ruchir Agarwal & Miles Kimball, 2019. "Enabling Deep Negative Rates to Fight Recessions: A Guide," IMF Working Papers 2019/084, International Monetary Fund.
    10. Katrin Assenmacher & Signe Krogstrup, 2018. "Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money," IMF Working Papers 2018/191, International Monetary Fund.
    11. Damir Tokic, 2017. "Negative interest rates: Causes and consequences," Journal of Asset Management, Palgrave Macmillan, vol. 18(4), pages 243-254, July.
    12. Zura Kakushadze & Willie Yu, 2019. "iCurrency?," Papers 1911.01272, arXiv.org, revised Nov 2019.
    13. Ad Van Riet, 2017. "The ECB’s Fight against Low Inflation: On the Effects of Ultra-Low Interest Rates," IJFS, MDPI, vol. 5(2), pages 1-27, April.

    More about this item

    Keywords

    monetary policy; negative interest rates; unconventional; stabilisation; transmission;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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