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Negative interest rates in Switzerland: what have we learned?

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  • Jean-Pierre Danthine

    (CEPR - Center for Economic Policy Research - CEPR, UNIL - Université de Lausanne = University of Lausanne, PJSE - Paris Jourdan Sciences Economiques - 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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, 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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The Swiss National Bank has introduced negative interest rates of minus 75bp in mid-January 2015. Large exemptions on commercial bank holdings at the SNB result in the average rate being significantly less negative than the marginal rate. With this constellation the policy transmission to the real economy is asymmetric. It fully satisfies the needs of a SOE in search of a negative interest differential, not those of an economy aiming at a 'classical' monetary stimulus at the zero bound. While the Swiss design would make it possible to impose rates that are significantly more negative with modest complementary features, the unpopularity of negative rates makes it likely that the ambition to totally free monetary policy of the ZLB will be thwarted by democratic realities in the near future.

Suggested Citation

  • Jean-Pierre Danthine, 2017. "Negative interest rates in Switzerland: what have we learned?," Working Papers halshs-01571635, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01571635
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01571635
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    Cited by:

    1. Abildgren, Kim & Kuchler, Andreas, 2023. "Firm behaviour under negative deposit rates," European Economic Review, Elsevier, vol. 151(C).
    2. Bank for International Settlements, 2019. "Unconventional monetary policy tools: a cross-country analysis," CGFS Papers, Bank for International Settlements, number 63, december.
    3. Christian Stettler, 2020. "Loss Averse Depositors and Monetary Policy around Zero," KOF Working papers 20-476, KOF Swiss Economic Institute, ETH Zurich.
    4. Stefan Angrick & Naoko Nemoto, 2017. "Central banking below zero: the implementation of negative interest rates in Europe and Japan," Asia Europe Journal, Springer, vol. 15(4), pages 417-443, December.
    5. Grahame Johnson & Sharon Kozicki & Romanos Priftis & Lena Suchanek & Jonathan Witmer & Jing Yang, 2020. "Implementation and Effectiveness of Extended Monetary Policy Tools: Lessons from the Literature," Discussion Papers 2020-16, Bank of Canada.
    6. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    7. Andrew Clark & Alexander Mihailov, 2019. "Why private cryptocurrencies cannot serve as international reserves but central bank digital currencies can," Economics Discussion Papers em-dp2019-09, Department of Economics, University of Reading.

    More about this item

    Keywords

    negative interest rates; paper currency hoarding; safe haven currency;
    All these keywords.

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