(This is part two of a series of questions I've posted here under "Negative interest rates")


I've happen to stumble on two articles, with some weeks, that the central bank(CB) of switzerland, due to Russia ruble crisis, and , has decided to use a negative interest rate for reserve deposits of banks at the CB, to facilitate the exchange rate peg. Bank of Japan(BoJ) also seems have implemented a negative interest rate, even if for different reasons(not sure...).

In all textbooks, the topic of negative interest rates is easily dismissed, or simply tought of as impossible, and so the authors work with non-negative lower bound(ex:deflation trap). Now, how is this negative rate going to affect the theory? Almost every part of the economic theory is going to be influenced by this.

Hence I'm dividing my question into several.

This part is for Fiscal Policy. With negative interest rates, what changes for demand-side policy(scope, effects,debt repayment capabilities etc.) can we expect?

Any help would be appreciated.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.