Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money PDF Download

Author: Katrin Assenmacher
Publisher: International Monetary Fund
ISBN: 1484370023
Category : Business & Economics
Languages : en
Pages : 31

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Book Description
Monetary policy space remains constrained by the lower bound in many countries, limiting the policy options available to address future deflationary shocks. The existence of cash prevents central banks from cutting interest rates much below zero. In this paper, we consider the practical feasibility of recent proposals for decoupling cash from electronic money to achieve a negative yield on cash which would remove the lower bound constraint on monetary policy. We discuss how central banks could design and operate such a system, and raise some unanswered questions.

Author: Mrs.Renee A-Jaoudi
Publisher: International Monetary Fund
ISBN: 1484374703
Category : Business & Economics
Languages : en
Pages : 31

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Book Description
Monetary policy space remains constrained by the lower bound in many countries, limiting the policy options available to address future deflationary shocks. The existence of cash prevents central banks from cutting interest rates much below zero. In this paper, we consider the practical feasibility of recent proposals for decoupling cash from electronic money to achieve a negative yield on cash which would remove the lower bound constraint on monetary policy. We discuss how central banks could design and operate such a system, and raise some unanswered questions.

Author: Katrin Assenmacher
Publisher:
ISBN:
Category :
Languages : en
Pages : 31

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Book Description
Monetary policy space remains constrained by the lower bound in many countries, limiting the policy options available to address future deflationary shocks. The existence of cash prevents central banks from cutting interest rates much below zero. In this paper, we consider the practical feasibility of recent proposals for decoupling cash from electronic money to achieve a negative yield on cash which would remove the lower bound constraint on monetary policy. We discuss how central banks could design and operate such a system, and raise some unanswered questions.

Author: Ruchir Agarwal
Publisher: International Monetary Fund
ISBN: 1484398777
Category : Business & Economics
Languages : en
Pages : 89

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Book Description
The experience of the Great Recession and its aftermath revealed that a lower bound on interest rates can be a serious obstacle for fighting recessions. However, the zero lower bound is not a law of nature; it is a policy choice. The central message of this paper is that with readily available tools a central bank can enable deep negative rates whenever needed—thus maintaining the power of monetary policy in the future to end recessions within a short time. This paper demonstrates that a subset of these tools can have a big effect in enabling deep negative rates with administratively small actions on the part of the central bank. To that end, we (i) survey approaches to enable deep negative rates discussed in the literature and present new approaches; (ii) establish how a subset of these approaches allows enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms from interest rates to aggregate demand are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use both now and in the event to facilitate broader political acceptance of negative interest rate policy at the onset of the next serious recession.

Author: Margherita Bottero
Publisher: International Monetary Fund
ISBN: 1498300855
Category : Business & Economics
Languages : en
Pages : 59

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Book Description
We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Author: Frank Hespeler
Publisher: Cuvillier Verlag
ISBN: 3736927606
Category : Business & Economics
Languages : en
Pages : 290

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Book Description
The emergence of new digital payment media has been of growing importance in the last two decades. These new forms of payment media rise the questions wether and how the monetary control of the central bank is influenced. This book analysis the influence of electronic money’s emergence on the monetary transmission process which is the central element linking monetary policy and the real economy. As economically most significant characteristics of electronic money low transaction costs as well as low regulation costs are isolated. As a consequence of these properties electronic money partially substitutes for traditional payment media, but also the market volume for payment media rises. A change in the allocation of the entire economy follows. It turns out that electronic money does not impede the central bank’s power to influence real economic activity. However it changes the nature of the transmission process and forces the central bank to react to changes in the relative importance of specific monetary transmission channels. These results are generated by numerical simulations of a version of today’s most common workhorse model for monetary policy analysis: the dynamic new Keynesian general equilibrium model.

Author: Mr.Gee Hee Hong
Publisher: International Monetary Fund
ISBN: 148436161X
Category : Business & Economics
Languages : en
Pages : 50

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Book Description
In this paper, we investigate how negative interest rate policy (NIRP) introduced in January 2016 by the Bank of Japan (BoJ) affected Japanese banks' lending and risk taking behavior. The BoJ's announcement was an unexpected surprise to the market and was followed by a sharp drop in equity prices of Japanese financial firms. We exploit the cross-sectional variation in the change of share prices on the day of the announcement to measure banks' differential exposure to NIRP. We show that more exposed banks increased their credit and took on more risk compared to banks that were less exposed to negative rates.

Author: Ioanna T. Kokores
Publisher: Cambridge Scholars Publishing
ISBN: 1527591867
Category : Business & Economics
Languages : en
Pages : 497

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Book Description
This book explores how monetary policy contributes to the efficient allocation of resources, with special reference made to the contribution of the effective workings of the financial system. It argues that the stability of the financial system promotes the smooth functioning of the payment systems and the effective transmission of monetary policy, thus promoting the achievement of monetary policy objectives. The interrelated issues addressed here include the ways various monetary policy objectives are achieved, their effective presentation to the public, and the strategic role of money growth in the conduct of monetary policy. The analysis underlines the context of financial-market performance in recent decades and the varied central bank responses to the emergence of the global financial crisis. This book constitutes a useful companion to graduate students in economics, researchers and business and central banking practitioners in understanding the unending quest of the shifting roles of money and financial practices to reconcile growth and stability.

Author: Steven Pressman
Publisher: Springer Nature
ISBN: 3031112407
Category : Business & Economics
Languages : en
Pages : 249

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Book Description
This edited volume presents the key unresolved debates in monetary macroeconomics, covering the five topics of budget, trade, taxes, exchange rates and monetary policy. For each topic, there are two authors — one arguing for a certain policy and one against. The book takes an approach eschewing mathematics or econometrics, instead presenting arguments in the spirit of political economy - while incorporating the most recent thinking in macroeconomics. This approach, combined with the objective of encouraging debate, makes the book ideal reading for students of monetary macroeconomics, researchers seeking alternative views, and the general public.

Author: Rima Turk
Publisher: International Monetary Fund
ISBN: 1475544685
Category : Business & Economics
Languages : en
Pages : 29

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Book Description
Negative policy interest rates have prevailed for some years in Denmark and are a more recent development in Sweden. Among other potential side effects, negative rates could weaken banks’ profitability by reducing net interest income, their main source of earnings. However, an analysis of financial statements at the country rather than the consolidated group level shows that bank margins have been broadly stable. At least to date, lower interest income was offset by reductions in wholesale funding costs and higher fee income. Nonetheless, the impacts on bank health and lending from negative interest rates will need to continue to be monitored closely.