Negative Interest Rate Policy and the Yield Curve

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.

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Decline in Oil Prices and the Negative Interest Rate Policy in Japan

SSRN Electronic Journal ◽

10.2139/ssrn.2866767 ◽

2016 ◽

Author(s):

Naoyuki Yoshino

Keyword(s):

Interest Rate ◽

Oil Prices ◽

Interest Rate Policy ◽

Rate Policy ◽

Negative Interest Rate Policy

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Negative interest rate policy by the Bank of Japan from the perspective of monetary policy in Europe

The EU–Japan Partnership in the Shadow of China ◽

10.4324/9781351172165-8 ◽

2018 ◽

pp. 150-168

Author(s):

Markus Heckel

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rate Policy ◽

Bank Of Japan ◽

Rate Policy ◽

Negative Interest Rate Policy

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Implications of Central banks’ negative policy rates on financial stability

Journal of Financial Economic Policy ◽

10.1108/jfep-10-2017-0096 ◽

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.

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Negative Interest Rate Policy as Conventional Monetary Policy

National Institute Economic Review ◽

10.1177/002795011523400102 ◽

2015 ◽

Vol 234 ◽

pp. R5-R14 ◽

Cited By ~ 4

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.

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