Long‐term interest rates under negative interest rate policy: Analysis of Japanese government bond and swap markets

2019 ◽  
Vol 31 (1) ◽  
pp. 12-17
Author(s):  
Takayasu Ito
Keyword(s):  
Interest Rate ◽  
Policy Analysis ◽  
Interest Rates ◽  
Japanese Government ◽  
Government Bond ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

scholarly journals Negative Interest Rate Risk. Atavism or Normalization of Central Banks’ Monetary Policy

2019 ◽  
Vol 3 (342) ◽  
pp. 89-116
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Interest Rate Risk ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

In the face of the global financial crisis, central banks have used unconventional monetary policy instruments. Firstly, they implemented the interest rate policy, lowering base interest rates to a very low (almost zero) level. However, in the following years they did not undertake normalizing activities. The macroeconomic environment required further initiatives. For the first time in history, central banks have adopted Negative Interest Rate Policy (NIRP). The main aim of the study is to explore the risk accompanying the negative interest rate policy, aiming at identifying channels and consequences of its impact on the economy. The study verifies the research hypothesis stating that the risk of negative interest rates, so far unrecognized in Theory of Interest Rate, is a consequence of low effectiveness of monetary policy normalization and may adopt systemic nature, by influencing – through different channels – the financial stability and growth dynamics of the modern world economy.

Implications of Central banks’ negative policy rates on financial stability

2018 ◽  
Vol 10 (2) ◽  
pp. 310-320
Author(s):  
Benjamin S. Kay
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Economy ◽  
Content Type ◽  
Interest Rate Policy ◽  
Trade Offs ◽  
Negative Interest Rates ◽  
Rate Policy ◽  
Negative Interest Rate Policy

Purpose While central bankers have widely discussed the trade-offs of negative interest rates on monetary policy, the consequences of negative rates on financial stability are less well understood. The purpose of this paper is to examine the likely and possible financial stability consequences of a negative rates policy with particular focus on banks, short-term funding markets, foreign exchange markets, asset managers, pension funds and insurers. Design/methodology/approach It draws from international experience with negative interest rates to identify financial stability threats posed to any economy by negative interest rates, and it also highlights where the US experience is likely to differ. Findings In time, financial market threats and other logistical issues of a negative interest rate policy can be managed or overcome. Even cumulatively, these threats are likely to be small as long as the rates remain only modestly negative. However, if the rates remain negative for long periods or they become more sharply negative, the rewards of avoiding negative rates increase. Originality/value Does the negative interest rate policy directly or through these challenges of implementation present a substantial obstacle to achieving financial stability objectives? As policy rates go negative in a greater share of the global economy, the financial stability consequences remain poorly understood and under discussed.

Negative Interest Rate Policy as Conventional Monetary Policy

2015 ◽  
Vol 234 ◽  
pp. R5-R14 ◽  
Author(s):  
Miles S. Kimball
Keyword(s):  
Economic Theory ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Rate Of Return ◽  
Interest Rate Policy ◽  
Paper Currency ◽  
Rate Policy ◽  
Standard Models ◽  
Negative Interest Rate Policy

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.

scholarly journals THE NATURAL INTEREST RATE FALLACY: WHY NEGATIVE INTEREST RATE POLICY MAY WORSEN KEYNESIAN UNEMPLOYMENT?

2018 ◽  
Vol 77 (304) ◽  
pp. 7 ◽  
Author(s):  
Thomas I. Palley
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Full Employment ◽  
Aggregate Demand ◽  
Natural Rate ◽  
Policy Assessment ◽  
Price Inflation ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

<p><strong>ABSTRACT</strong></p><p><strong></strong>Negative interest rate policy (NIRP) has quickly become a consensus policy within the economics establishment. This paper argues that consensus is dangerously wrong, resting on flawed theory and flawed policy assessment. Regarding theory, NIRP draws on fallacious pre-Keynesian classical economic logic that asserts there is a natural rate of interest which can ensure full employment. That pre-Keynesian logic has been augmented by zero lower bound economics which claims the natural rate may be negative in times of severe demand shortage, so that policy must deliver it since the market cannot. In contrast, Keynes argued investment could become saturated so lower interest rates cannot increase aggregate demand (AD) and no natural interest rate exists. Regarding policy assessment, NIRP turns a blind eye to the possibility that negative interest rates may reduce AD, cause financial fragility, create a macroeconomics of whiplash owing to contradictions between policy today and tomorrow, promote currency wars that undermine the international economy, and foster a political economy that spawn’s toxic politics. Worst of all, NIRP maintains and encourages the flawed model of growth, based on debt and asset price inflation, which has already done such harm.</p><p><strong><br /></strong></p><p><strong>LA FALACIA DE LA TASA DE INTERÉS NATURAL: ¿POR QUÉ LA POLÍTICA DE TASAS DE INTERÉS NEGATIVAS PUEDE EMPEORAR EL DESEMPLEO KEYNESIANO?</strong></p><p> </p><p><strong>RESUMEN</strong></p><p><strong></strong>En la economía convencional ha cristalizado de forma rápida un consenso en torno de la política de tasas de interés negativas (PTIN). En este artículo argumento que este consenso es erróneo y peligroso, dado que descansa en una teoría equivocada y en una evaluación de política defectuosa. Respecto de la teoría, la PTIN se basa en una lógica clásica pre-keynesiana falsa que sostiene que existe una tasa de interés natural que puede garantizar el pleno empleo. Esa lógica pre-keynesiana se ha extendido con la economía de límite inferior cero que afirma que la tasa natural puede ser negativa en momentos de escasez severa de demanda, de suerte que la política económica debe proveerla dado que el mercado es incapaz de hacerlo. En contraste, Keynes argumenta que la inversión puede saturarse, de manera que las tasas de interés bajas no pueden incrementar la demanda agregada (DA), y que la tasa de interés natural no existe. En cuanto a la evaluación de política, la PTIN soslaya la posibilidad de que las tasas de interés negativas pueden reducir la DA, causar fragilidad financiera, generar una macroeconomía de latigazos debido a las contradicciones entre la política de hoy y la de mañana, promover guerras monetarias que socaven a la economía internacional y fortalecer una economía política que engendra políticas tóxicas. Lo peor de todo es que la PTIN sostiene y alienta el modelo de crecimiento erróneo que se basa en deuda y en la inflación del precio de los activos, que ya ha causado un gran daño.</p>

scholarly journals Negative Interest Rate Policy of Banks in Japan: A Review

2021 ◽  
pp. 26-33
Author(s):  
Mst. Khairunnassa ◽  
Zainatul Shuhaida Abd Rahman ◽  
Mohammed Aktaruzzaman
Keyword(s):  
Interest Rate ◽  
Strategic Decision ◽  
Japanese Economy ◽  
Free Text ◽  
Interest Rate Policy ◽  
Domestic Markets ◽  
Financing Cost ◽  
Rate Policy ◽  
Negative Interest Rate Policy

The negative interest rate policy (NIRP) that lowered the long-term rate below zero might have impacted positively in Asian economies like Japan. The main objective of this study was to anticipate the effects of NIRP in the Japanese economy where exponential growth is missing for the last few decades. This paper review literatures on the state of NIRP in Japanese banks that lost their profit margins in domestic markets but discovered a new prospect to generate profit after the NIRP was introduced in January 2016. Online libraries and Google scholar electronic databases were researched using free-text words and NIRP subject headings relevant to the topic. Most studies identified were exploratory and of varying methodological design. The inclusion studies found that the strategic decision of the central bank in Japan resulted in bank-explicit variables like capitalization; subsidizing structure; plan of action; financing cost presentation; and focused conditions seem to lessen banks' eagerness to loan in a negative loan fee setting. These challenges need to be addressed in a manner that will help realize Japan's economic potential. This study will help to instill interest among policymakers to think of financial disputes to effortlessly contribute towards the development of the country.

scholarly journals Expansionary yet different: Credit supply and real effects of negative interest rate policy

2021 ◽  
Author(s):  
Margherita Bottero ◽  
Camelia Minoiu ◽  
José-Luis Peydró ◽  
Andrea Polo ◽  
Andrea F. Presbitero ◽  
...  
Keyword(s):  
Interest Rate ◽  
Interest Rate Policy ◽  
Real Effects ◽  
Credit Supply ◽  
Rate Policy ◽  
Negative Interest Rate Policy
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