proem

Economics, Econometrics and Finance

3 years ago

Negative interest rates harm economy, exemption thresholds offer partial relief.

SSRN Electronic Journal

On the Negatives of Negative Interest Rates and the Positives of Exemption Thresholds

Aleksander Berentsen, Hugo van Buggenum, Romina Ruprecht

Paper Summary

Economics, Econometrics and Finance

3 years ago

Negative interest rates harm economy, exemption thresholds offer partial relief.

SSRN Electronic Journal

On the Negatives of Negative Interest Rates and the Positives of Exemption Thresholds

Aleksander Berentsen, Hugo van Buggenum, Romina Ruprecht

Paper Summary

Negative interest rates set by major central banks can distort investment decisions, leading to lower output and welfare in the long run. These rates also reduce commercial bank profitability. Exempting some reserves from negative rates can help banks, but it doesn't fix the investment distortions caused by negative rates.