Negative Interest Rates
Negative interest rates are an invention of monetary authorities to show that monetary activism does not have boundaries, i.e., as if there is no such thing as a liquidity trap. Their presence in the financial landscape has redefined the benefits to savers and to investors. Governments can now borro...
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doaj-b23b07dcf9764f2f80c1e6129cbdd5f22020-11-25T02:54:54ZengMDPI AGJournal of Risk and Financial Management1911-80661911-80742020-05-0113909010.3390/jrfm13050090Negative Interest RatesSarkis Joseph Khoury0Poorna C. Pal1University of California, Riverside, CA 92521, USAGlendale Community College, Glendale, CA 91208, USANegative interest rates are an invention of monetary authorities to show that monetary activism does not have boundaries, i.e., as if there is no such thing as a liquidity trap. Their presence in the financial landscape has redefined the benefits to savers and to investors. Governments can now borrow at will without visibly adding to budget deficits. This makes negative interest borrowing an alternative to raising taxes. Banks can now achieve regulatory compliance partially at the expense of depositors. Commercial banks pay to keep money at the central bank instead of earning interest on it. This paper shows the true nature of negative interest rates and their consequences on various economic agents and performance measures, specifically on economic growth and exchange rates. In addition, this paper demonstrates that the arguments in favor of negative interest rates have been largely exaggerated based on the weight of the evidence that shows the United States, which never issued negative interest rates debt, is a leader among developed countries in terms of economic growth in a non-inflationary environment.https://www.mdpi.com/1911-8074/13/5/90negative ratesnominal ratesexchange ratesmonetary policyfiscal policysaving rates |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Sarkis Joseph Khoury Poorna C. Pal |
spellingShingle |
Sarkis Joseph Khoury Poorna C. Pal Negative Interest Rates Journal of Risk and Financial Management negative rates nominal rates exchange rates monetary policy fiscal policy saving rates |
author_facet |
Sarkis Joseph Khoury Poorna C. Pal |
author_sort |
Sarkis Joseph Khoury |
title |
Negative Interest Rates |
title_short |
Negative Interest Rates |
title_full |
Negative Interest Rates |
title_fullStr |
Negative Interest Rates |
title_full_unstemmed |
Negative Interest Rates |
title_sort |
negative interest rates |
publisher |
MDPI AG |
series |
Journal of Risk and Financial Management |
issn |
1911-8066 1911-8074 |
publishDate |
2020-05-01 |
description |
Negative interest rates are an invention of monetary authorities to show that monetary activism does not have boundaries, i.e., as if there is no such thing as a liquidity trap. Their presence in the financial landscape has redefined the benefits to savers and to investors. Governments can now borrow at will without visibly adding to budget deficits. This makes negative interest borrowing an alternative to raising taxes. Banks can now achieve regulatory compliance partially at the expense of depositors. Commercial banks pay to keep money at the central bank instead of earning interest on it. This paper shows the true nature of negative interest rates and their consequences on various economic agents and performance measures, specifically on economic growth and exchange rates. In addition, this paper demonstrates that the arguments in favor of negative interest rates have been largely exaggerated based on the weight of the evidence that shows the United States, which never issued negative interest rates debt, is a leader among developed countries in terms of economic growth in a non-inflationary environment. |
topic |
negative rates nominal rates exchange rates monetary policy fiscal policy saving rates |
url |
https://www.mdpi.com/1911-8074/13/5/90 |
work_keys_str_mv |
AT sarkisjosephkhoury negativeinterestrates AT poornacpal negativeinterestrates |
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1724719183780904960 |