Related papers: On the Normality of Negative Interest Rates

The interest rates (or nominal yields) can be negative, this is an unavoidable fact which has already been visible during the Great Depression (1929-39). Nowadays we can find negative rates easily by e.g. auditing. Several theoretical and…

In this paper, we propose a new model to address the problem of negative interest rates that preserves the analytical tractability of the original Cox-Ingersoll-Ross (CIR) model without introducing a shift to the market interest rates,…

Many countries have adopted negative interest rate policies with tiering remuneration, which allows for exemption from negative rates. This practice has led to higher interbank trading volumes, with market rates ranging between zero and the…

To the knowledge of the author, this is the first time it has been shown that interest rates that are extremely high by modern standards (100% and higher) are necessary within a zero-sum monetary system, and not just driven by greed.…

The main objective of this paper is to fill a critical gap in the literature by analyzing the effects of decentralization on the macroeconomic stability. A survey of the voluminous literature on decentralization suggests that the question…

Many countries impose regulatory restrictions on lending rates known as interest rate caps. In most cases, these restrictions apply to the effective (rather than nominal) interest rate, a measure which incorporates all commissions and fees…

In the present paper, we investigate the optimal capital injection behaviour of an insurance company if the interest rate is allowed to become negative. The surplus process of the considered insurance entity is assumed to follow a Brownian…

With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…

This paper surveys the empirical literature of inflation targeting. The main findings from our review are the following: there is robust empirical evidence that larger and more developed countries are more likely to adopt the IT regime; the…

The money supply is endogenous if the monetary policy strategy is the so called Inflation and Interest Rate Targeting, IRT. With that and perfect credibility, the theory of the price level and inflation only needs the Fisher equation, but…

A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…

We investigate the macroeconomic consequences of narrow banking in the context of stock-flow consistent models. We begin with an extension of the Goodwin-Keen model incorporating time deposits, government bills, cash, and central bank…

In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…

In macroeconomics, an emerging discussion of alternative monetary systems addresses the dimensions of systemic risk in advanced financial systems. Monetary regime changes with the aim of achieving a more sustainable financial system have…

We consider a central bank strategy for maintaining a two-sided currency target zone, in which an exchange rate of two currencies is forced to stay between two thresholds. To keep the exchange rate from breaking the prescribed barriers, the…

I show that the Zero Lower Bound (ZLB) on interest rates can be used to identify the causal effects of monetary policy. Identification depends on the extent to which the ZLB limits the efficacy of monetary policy. I propose a simple way to…

We study how a central bank should dynamically set short-term nominal interest rates to stabilize inflation and unemployment when macroeconomic relationships are uncertain and time-varying. We model monetary policy as a sequential…

We extend in a minimal way the stylized model introduced in in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a `Central Bank' that…

It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates.…

Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…