Dr Allen Baby, a faculty member at EIBFS, who introduced the conference topic, raised concerns on the
negative interest rates in the developed world which is likely to have an impact on the long term viability of the banking industry by discouraging depositors and investors.
And yet, in none of the economies attempting the unorthodox experiment of
negative interest rates has there been a return to growth and full employment.
Negative interest rates mean that depositors pay to park their money in the central bank or in the retail banks.
Negative interest rates are intended to spur growth and easy loans by penalizing banks for hoarding funds at the central bank.
First came zero interest rates, then quantitative easing and now
negative interest rates -- one futile attempt begetting another.
Keywords: monetary policy;
negative interest rates; unconventional; stabilisation; transmission
Zurich: Switzerland's central bank on Thursday announced it was introducing
negative interest rates, in a bid to stop the Swiss franc -- a safe haven currency -- from gaining further value.
Many economists are not expecting rates to rise until 2015 at the earliest while Bank of England deputy governor Paul Tucker recently told MPs that he had even put
negative interest rates up for consideration.
With nominal interest rates near the zero lower bound (ZLB) in many major economies, it is theoretically untenable to apply Gaussian affine term structure models (GATSMs) while ignoring their inherent material probabilities of
negative interest rates. I propose correcting that deficiency by adjusting the entire GATSM term structure with an explicit function of maturity that represents the optionality associated with the present and future availability of physical currency.
Analysts feel that the central bank's stance shows that it is against
negative interest rates.
The Fed has monitored other central bank actions, but hasn't seriously considered
negative interest rates. He hasn't seen what he had feared, an asset price bubble coming out of the Fed's gradualist policy and low volatility environment, although asset prices are high by historical standards.
