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Negative Nominal Interest Rates: History and Current Proposals

  • Cordelius Ilgmann, Martin Menner

Given the renewed interest in negative interest rates as a means for overcoming the zero bound on nominal interest rates, this article reviews the history of negative nominal interest rates and gives a brief survey over the current proposals that received popular attention in the wake of the financial crisis of 2007/08. It is demonstrated that ‘taxing money’ proposals have a long intellectual history and that instead of being the conjecture of a monetary crank, they are a serious policy proposal. In a second step the article points out that, besides the more popular debate on a Gesell tax as a means to remove the zero bound on nominal interest rates, there is a class of neoclassical search-models that advocates a negative tax on money as efficiency enhancing. This strand of the literature has so far been largely ignored by the policy debate on negative interest rates.

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Paper provided by Institute of Spatial and Housing Economics, Munster Universitary in its series Working Papers with number 201143.

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Handle: RePEc:muc:wpaper:201143
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