IDEAS home Printed from https://ideas.repec.org/p/bca/bocadp/15-13.html
   My bibliography  Save this paper

The International Experience with Negative Policy Rates

Author

Listed:
  • Harriet Jackson

Abstract

A key issue in the renewal of the inflation-control agreement is the question of the appropriate level of the inflation target. Many observers have raised concerns that with the reduction in the neutral rate, and the experience of the recent financial crisis, the effective lower bound (ELB) is more likely to be binding in the future if inflation targets remain at 2 per cent. This has led some to argue that the inflation target should be raised to reduce the incidence of ELB episodes. Much of this debate has assumed that the ELB is close to, but not below, zero. Recently, however, a number of central banks have introduced negative policy interest rates. This paper outlines the concerns associated with negative interest rates, provides an overview of the international experience so far with negative policy rates and sets out some general observations based on this experience. It then discusses how low policy interest rates might be able to go in these economies, and offers some considerations for the renewal of the inflation-control agreement.

Suggested Citation

  • Harriet Jackson, 2015. "The International Experience with Negative Policy Rates," Discussion Papers 15-13, Bank of Canada.
  • Handle: RePEc:bca:bocadp:15-13
    as

    Download full text from publisher

    File URL: http://www.bankofcanada.ca/wp-content/uploads/2015/11/dp2015-13.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Eric Santor & Lena Suchanek, 2013. "Unconventional Monetary Policies: Evolving Practices, Their Effects and Potential Costs," Bank of Canada Review, Bank of Canada, vol. 2013(Spring), pages 1-15.
    2. Sharon Kozicki & Eric Santor & Lena Suchanek, 2011. "Unconventional Monetary Policy: The International Experience with Central Bank Asset Purchases," Bank of Canada Review, Bank of Canada, vol. 2011(Spring), pages 13-25.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How Low Can They Go?
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2016-02-29 19:02:33
    2. How low can they go?
      by Stephen G. Cecchetti in Huffington Post Business on 2016-04-04 16:38:55

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maria Cristina Recchioni & Yu Sun & Gabriele Tedeschi, 2016. "Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model," Working Papers 2016/23, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Christophe Blot & Paul Hubert, 2016. "Negative interest rates: incentive or hindrance for the banking system?," Sciences Po publications info:hdl:2441/4becfeb5av9, Sciences Po.
    3. Christian Pfister, Natacha Valla, 2018. "‘New Normal’ or ‘New Orthodoxy’? Elements of a Central Banking Framework for the After-Crisis," Working papers 680, Banque de France.

    More about this item

    Keywords

    Central bank research; Financial markets; International topics; Monetary policy framework;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • 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
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocadp:15-13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://www.bank-banque-canada.ca/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.