Summary of Negative Interest Rates

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Negative Interest Rates summary
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In today’s environment of low growth and subdued inflation, central bankers in some countries are experimenting with negative interest rates to see how far they can go to boost economies without inciting a public backlash. But how do negative interest rates work, and are they actually effective in stimulating growth? Economists Jennifer Blanke and Signe Krogstrup delve into the matter in this informative report, outlining the practical aspects and potential ramifications of negative interest rates. getAbstract recommends their succinct and accessible article to investors and executives for its perspective on a new wrinkle in monetary policy.

About the Authors

Jennifer Blanke is chief economist at the World Economic Forum. Signe Krogstrup is an adviser with the International Monetary Fund’s research department.

 

Summary

The subpar economic growth of recent years has led some central banks to venture into negative interest rate territory in a bid to boost inflation and growth. The Danish central bank started the trend in 2012, followed by some European central banks in 2014 and the Bank of Japan in 2016. Though negative interest rates are just an extension of accommodative monetary policy that takes interest rates below zero, they pack a psychological punch.

Conventional thinking once posited that short-term interest rates below zero would induce people to keep their cash on hand, ...


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