Summary of The Interest Rate Unbound?

Brookings Institution,

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The Interest Rate Unbound? summary
How much below zero could interest rates go? And could negative rates put an end to paper money?

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Negative real interest rates, although they sound counterintuitive, have existed at various times in history. Recently, central banks in Switzerland, Denmark, Sweden, Japan and the euro zone have adopted such policies either to manage exchange rates or to provide stimulus in today’s low-growth environment. Economist Jean-Pierre Danthine examines the impacts of such policies. Although his paper is rather technical and would have benefited from editing for clarity, it provides some good nuggets of information about negative rates’ impacts on society. getAbstract suggests Danthine’s eye-opening report to investors, policy makers and executives.

In this summary, you will learn

  • Why some central banks have instituted negative interest rate policies
  • How effective those policies have been
  • What social consequences negative interest rates might have
 

Summary

Five central banks have opted to set their national interest rates below zero. In Switzerland and Denmark, the goals were to safeguard the exchange rate parities of the Swiss franc and the Danish krone, respectively. By early 2015, the interest rates on bank reserves in Switzerland and Denmark were ...
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About the Author

Jean-Pierre Danthine is president of the Paris School of Economics.


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