Central banking below zero: the implementation of negative interest rates in Europe and Japan

Stefan Angrick, Naoko Nemoto

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

This paper provides an overview of the operational implementation of negative interest rates in Europe and Japan. Drawing attention to the fact that there is precedent for negative policy rates and negative money market rates, the paper addresses conceptual issues and summarizes measures which define negative interest rate policy. Based on detailed institutional analysis and an examination of the interaction of interest rate policies with balance sheet policies, it is argued that there exists substantial heterogeneity in the purpose, design, and operational specificities of negative interest rate policies across economies, with significant consequences for effective market rates, private sector funding conditions, and expectations. Summarizing transmission channels of negative rates, benefits, and risks of the policy, the paper calls attention to potential adverse effects resulting from the interaction of negative interest rates with tighter liquidity and capital standards adopted since the Global Financial Crisis.

Original languageEnglish
Pages (from-to)417-443
Number of pages27
JournalAsia Europe Journal
Volume15
Issue number4
DOIs
Publication statusPublished - 2017 Dec 1
Externally publishedYes

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Social Sciences(all)

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