Reducing the Lower Bound on Market Interest Rates

van Suntum Ulrich, Kaptan Metin, Ilgmann Cordelius


Zusammenfassung
This paper critically discusses three proposals to overcome the zero interest bound, which have recently been proposed by prominent economists. We trace back the historical origins of these proposals, reaching back to the late 19th century, and comment on their theoretical and practical deficiencies. We propose a much simpler method to spur real investment in times of a deep recession, based on long term central bank loans with low but non-negative base rates. With the prospect of decreasing default risks after the recession, this measure has a similar effect like negative base rates in time of crisis. We therefore hope to convey the message that the effects of the zero interest bound can at least be mitigated without substantially changing the existing monetary regime.

Schlüsselwörter
negative interest rates; lower zero bound; monetary policy



Publikationstyp
Aufsatz (Zeitschrift)

Begutachtet
Ja

Publikationsstatus
Veröffentlicht

Jahr
2011

Fachzeitschrift
Economic Analysis and Policy

Band
2011

Ausgabe
41

Erste Seite
133

Letzte Seite
146

Seiten
133-146

Sprache
Englisch

ISSN
0313-5926