![]() ![]() Across jurisdictions, money market rates have tracked policy rates closely as the latter moved below zero ( Eisenschmidt and Smets 2019). The transmission of NIRP has been most visible in money market rates, but long-term yields have also responded. Overall, the available evidence so far suggests that effects of NIRP on inflation and output may be comparable to those of conventional interest rate cuts or of other unconventional monetary policy. In addition, in Japan, NIRP may have supported the economy through the exchange rate channel ( Honda and Inoue 2019). Still, for the euro area, NIRP seems to have had small but positive effects on inflation and growth ( Rostagno and others 2019) and boosted corporate investment ( Altavilla and others 2019b). The evidence on the macroeconomic effects of NIRP remains sparse, partly because it is challenging to separate the effects of NIRP from those of other concurrent UMP measures. Overall, NIRP has likely supported growth and inflation. It comprises both a discussion of detailed findings in the academic literature and of broader country experiences, and points to open issues. ![]() Hence, in contrast to other surveys, this paper focuses on NIRP, and covers a broad range of its effects. However, the specific aspects of NIRP deserve a deeper discussion, and an overall assessment of the effectiveness or desirability of NIRP should be based on its effects on the decisions of households, banks, and firms, in addition to asset prices and the overall economy. ![]() These either discuss the effects of unconventional monetary policies (UMP) more generally, including quantitative easing (QE) and forward guidance ( Bhattarai and Neely 2016 Dell’Ariccia, Rabanal, and Sandri 2018 and CGFS 2019), cover low interest rates more broadly ( CGFS 2018), or zoom in on one aspect of NIRP (for example, Brown on NIRP and bank lending). Several existing good surveys also cover NIRP as part of broader assessments. It summarizes the evidence accumulated since the discussion in IMF (2017). This paper aims to take stock of the experience with NIRP so far. The economic effects of the COVID-19 crisis, and associated prospects of a protracted recovery in an environment where many central banks have exhausted conventional monetary policy space, have brought the issue back to the forefront. Beyond these concerns, NIRP was and remains politically controversial, partly since it is novel, counterintuitive, and often misunderstood. To what extent would negative policy rates be transmitted to deposit and lending rates? Might the effects be counterproductive, with financial intermediaries reducing lending? Would banks, companies, and households switch massively to cash holdings? What would be the effects on the yield curve as a whole? Would the introduction of NIRP bring about disruptions in the functioning of money markets? Concerns were also raised about financial stability implications stemming from a potentially significant shift to risky assets by financial intermediaries. These moves were accompanied by many questions. ![]() Central banks in Denmark, the euro area, Japan, Sweden, and Switzerland turned to NIRP as their economies faced cyclical headwinds and, in the cases of Denmark and Switzerland, strong upward pressure on their currencies even after short-term policy rates had been pushed to about zero. Starting in 2012 several central banks introduced negative interest rate pol-icies (NIRP) that brought up many important questions. ![]()
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