Working paper
The signalling channel of negative interest rates
- Abstract:
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Negative interest rates remain a controversial policy for central banks. We study a novel signalling channel and ask under what conditions negative rates should exist in an optimal policymaker’s toolkit. We prove two necessary conditions for the opti mality of negative rates: a time-consistent policy setting and a preference for policy smoothing. These conditions allow negative rates to signal policy easing, even with deposit rates constrained at zero. In an estimated model, the signal...
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- Publication status:
- Published
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Authors
Bibliographic Details
- Publisher:
- University of Oxford Publisher's website
- Article number:
- 956
- Series:
- Department of Economics Discussion Paper Series
- Publication date:
- 2021-12-16
- Paper number:
- 956
Item Description
- Language:
- English
- Keywords:
- Pubs id:
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1225447
- Local pid:
- pubs:1225447
- Deposit date:
- 2021-12-16
Terms of use
- Copyright holder:
- de Groot and Haas
- Copyright date:
- 2021
- Rights statement:
- © 2021, The Author(s).
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