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The Interest Rate Unbound?

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What have we learned from the recent international experiences with negative interest rates? This paper reviews the evidence. Negative interest rates have proved so unpopular that it is unlikely that… Click to show full abstract

What have we learned from the recent international experiences with negative interest rates? This paper reviews the evidence. Negative interest rates have proved so unpopular that it is unlikely that a full liberation from the Zero Lower Bound is within sight. The Swiss experience, however, suggests it might be possible to adopt significantly lower interest rates by capitalizing on the unwillingness of banks to transmit negative rates to retail depositors while making it financially feasible for them to do so. The resulting asymmetric transmission mechanism may suit small open economies in need of a negative interest differential.

Keywords: rate unbound; negative interest; interest rate; interest rates; interest

Journal Title: Comparative Economic Studies
Year Published: 2017

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