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The Interest Rate Unbound?

Author

Listed:
  • Jean-Pierre Danthine

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique)

Abstract

What have we learned from the recent international experiences with negative interest rates? This paper reviews the evidence. Negative interest rates have proved so unpopular that it is unlikely that a full liberation from the Zero Lower Bound is within sight. The Swiss experience, however, suggests it might be possible to adopt significantly lower interest rates by capitalizing on the unwillingness of banks to transmit negative rates to retail depositors while making it financially feasible for them to do so. The resulting asymmetric transmission mechanism may suit small open economies in need of a negative interest differential.

Suggested Citation

  • Jean-Pierre Danthine, 2017. "The Interest Rate Unbound?," Post-Print halshs-01630409, HAL.
    • Handle: RePEc:hal:journl:halshs-01630409
    DOI: 10.1057/s41294-017-0019-3
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    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

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