Tag Archives: Negative interest rate

In a CEPR discussion paper, Andreas Fuster, Tan Schelling, and Pascal Towbin analyze how banks respond to changes in the threshold level above which reserves held at the central bank are charged negative interest: … exploiting an unexpected decision by the Swiss National Bank in September 2019 to change the threshold calculation without taking any other policy actions. This change led to a large increase in overall exemptions, but with variation across banks. Using a...

The BIS has issued two reports that assess the implications of unconventional monetary policies. The report prepared by the Committee on the Global Financial System discusses … a number of unconventional monetary policy tools (UMPTs). After a decade of experience with UMPTs the report takes stock of central banks’ experience and draws some lessons for the future. The report focuses on four sets of tools: negative interest rate policies, new central bank lending operations, asset purchase...

On swissinfo.ch, Fabio Canetg explains how the Swiss National Bank prevents banks from hoarding cash rather than holding reserves at the central bank (which pay negative interest). He points to the following sentence in the SNB’s December 2014 press release (my emphasis) and he speculates that banks could, in principle, implement similar schemes to keep depositors from withdrawing cash: The threshold currently corresponds to 20 times the minimum reserve requirement for the reporting...

NZZ, April 25, 2019. PDF. Modern monetary theory (MMT) is neither a theory, nor modern, nor exclusively monetary. I discuss fallacies related to MMT. Dynamic inefficiency requires permanent, not transitory, r<g. For now, policy makers should rely on common sense rather than MMT.

NZZ, April 25, 2019. PDF. Modern monetary theory (MMT) is neither a theory, nor modern, nor exclusively monetary. I discuss fallacies related to MMT. Dynamic inefficiency requires permanent, not transitory, r<g. For now, policy makers should rely on common sense rather than MMT.

NZZ, March 13, 2019. PDF. Long-term real interest rates do not reflect monetary policy. In the recent past, monetary policy has contributed to lower fixed-income interest rates but also to higher returns on other asset classes. Complaining about low rates but not adjusting one’s portfolio makes little sense; there is no “financial repression.” If politicians want to subsidize pension funds they should contribute funds from the government budget rather than asking the central bank to...

NZZ, March 13, 2019. PDF. Updated: Ökonomenstimme, March 22, 2019. HTML. Long-term real interest rates do not reflect monetary policy. In the recent past, monetary policy has contributed to lower fixed-income interest rates but also to higher returns on other asset classes. Complaining about low rates but not adjusting one’s portfolio makes little sense; there is no “financial repression.” If politicians want to subsidize pension funds they should contribute funds from the government...

Good Intentions One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive. It seemed a good idea at first… - Click to enlarge...

Central bankers often argue that CBDC would increase the risk of bank runs. On his blog, JP Koning rejects this notion. After all, he retorts, during a confidence crisis bank customers would no longer have to queue to withdraw cash; lender of last resort support would be provided much more quickly; and “large” cash holders would continue to shift funds into treasury bills, not into CBDC. Koning writes: The general criticism here is that during a crisis, households and businesses will...

In the FT, Sam Fleming and Demetri Sevastopulo report that the White House considers Marvin Goodfriend for the Federal Reserve’s Board of Governors. He has criticised the Fed’s crisis-era balance sheet expansion, saying the central bank should generally not purchase mortgage-backed securities, and has advocated the use of monetary policy rules to guide policy, as has Mr Quarles. … At the same time, however, Mr Goodfriend has been willing to contemplate the use of deeply negative rates to...