by Giovanni Dell’Ariccia, Vikram Haksar, and Tommaso Mancini-Griffoli
August 3, 2017
Versions in ربي (Arabic), 中文 (Chinese), Español (Spanish), 日本語 (Japanese); Русский (Russian)
A recent IMF paper looks at the effectiveness of negative interest rates, drawing on the initial experience of the euro area, Denmark, Japan, Sweden, and Switzerland (photo: Tuckraider/iStock by Getty Images)
Zero was gradually adopted in the ancient world—both east and west—as the ultimate point of reference, a point above and below which things change. For the ancient Egyptians, zero represented the base of pyramids. In science it became the freezing point of water, in geography the altitude of the sea, in history the starting point of calendars.
In the realm of monetary policy, zero was typically seen as the lower bound for interest rates. That has changed in recent years in the context of a slow recovery from the 2008 crisis. Several central banks hit zero and began experimenting with negative interest rate policies. Most did so to counter very low inflation, but some also were concerned about currencies that […]