# Tag Info

1

I am not sure if 41% is correct I wanted to double check it but could not find a reference to primary source for 41%, but the overall narrative seems to be true. For example, Reinhart, C. M., & Smith, R. T. (2002), in their paper that you can read here argue that Switzerland in the late 1970s in which substantial capital inflows – partly ...

1

Since this is a question about central banks... they would not want to do this because it would push many ordinary people to put their savings in highly speculative assets, potentially destabilizing the economy. It is/was already a bit of a concern even with near zero, never mind mildly negative interest rates. There's a fine line between "kickstarting the ...

0

What stops it are the basic laws of supply and demand. A highly negative interest rate means that someone will pay you to take their money. There are very few people willing to offer credit on those terms. This is the equivalent of me offering someone 100 dollars today and asking for 90 dollars in return tomorrow, with the added risk of not receiving all ...

0

Pretty much yes. It is because cash carries implicit zero interest in itself. In practice interest rates can be little bit negative because having all your money in form of cash could be dangerous (you might get robbed, also it’s not easy to store let’s say 20000e at home etc.). However, if a country would went cashless the central bank could in principle ...

1

They would be just pushed to their lowest possible level. Recent experience in Switzerland and Germany shows the interest rate can be slightly negative but that’s it. Once the interest rate hit (zero) lower bound it can’t be pushed further as long as there is cash that carries implied zero interest. At that point central bank would have to resort to other ...

3

Some of your equations are wrong and you need to account for the time value of money correctly in some places. It might be useful to write down a timeline and make sure to bring all payments to the same point in time (let's take time 0 as our reference) Therefore, what you receive should have the same present value to what you pay (I'll use American ...

0

If by “greater”, you mean higher number It depends on how you quote exchange rate. Under American system the exchange rate between USD and euro would be given by $S=EUR/USD$ under European system the exchange rate would be quoted other way around as $S=USD/EUR$. So under American system if the USD appreciates due to higher interest rates the $S$ would ...

0

Additionally, lower (or even negative) interest rates make a country's currency less attractive, so in principle lowering its value in foreign exchange, thus potentially leading to an increase in exports, which in an exports-oriented country could have the effect of stimulating the economy to grow. (Note that this can lead to a currency war, in which other ...

2

In short, the belief this reflects is that cheap money is spent more freely. Since GDP counts the sum-total of value-added transactions in the economy, in principle this means that monetary policy affecting the velocity of money can in turn affect GDP. Theoretically, this is valid to the extent that debt-servicing costs are a significant friction in the ...

11

Actually they're saying that, when cash is available, people need not to deposit their money into the bank, and hence is "guaranteed" (not taking into account risks associated with holding on to cash, like fire or getting stolen) a 0% interest rate. Having cash, therefore, means that if the deposit rate goes into the negative territory (you're charged to ...

Top 50 recent answers are included