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Negative Interest Rate Policy as Conventional Monetary Policy

Published online by Cambridge University Press:  01 January 2020

Miles S. Kimball
Miles S. Kimball*
Affiliation:
University of Michigan Professor of Economics and Survey Research. Quartz Columnist and Independent Blogger on Economics, Politics and Religion
*
E-mail: [email protected]; Blog: http://blog.supplysideliberal.com
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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.

Keywords

monetary policynegative interest ratesunconventionalstabilisationtransmissionE52E58E42E43E41E31
Type
Research Articles
Information
National Institute Economic Review , Volume 234 , November 2015 , pp. R5 - R14
Copyright
Copyright © 2015 National Institute of Economic and Social Research

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Footnotes

Along with coauthors, I have several academic papers on negative interest rate policy in the works. In particular, this paper builds on Agarwal and Kimball (2015).

References

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