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Negative interest rate policy as conventional monetary policy
External Authors
Kimball, M S
Related Themes
Macro-Economic Dynamics and PolicyTags
JEL Code
E52, E58, E42, E43, E41, E31
Journal
National Institute Economic Review
Publisher
Sage Publications, London
External Resources
Issue
234
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.
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