scholarly journals Monetary Policy and Bank Equity Values in a Time of Low and Negative Interest Rates

2019 ◽  
Vol 2019 (064) ◽  
Author(s):  
◽  
Miguel Ampudia ◽  
Skander J. Van den Heuvel ◽  
◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Values ◽  
Negative Interest Rates ◽  
Bank Equity

scholarly journals Consequences of divergent monetary policies of the highly industrialised countries on global and local level

2016 ◽  
pp. 755-766
Author(s):  
Djordje Djukic
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Positive Impact ◽  
Local Level ◽  
Foreign Debt ◽  
Negative Consequences ◽  
Negative Effects ◽  
Negative Interest Rates ◽  
The Usa ◽  
Buy Back

In contrast to the USA, negative interest rates in the Eurozone and other European countries, as a result of unprecedented expansionary monetary policy implemented by the European Central Bank since 2014, will have far-reaching negative consequences. Decisions of citizens to withdraw deposits from banks and keep them in safe deposit boxes, invest in real estate and land, and decisions of companies to hold large amounts of cash or to buy-back shares and close up, under conditions of divergent policies of central banks in highly industrialized countries, indicates the presence of risk of secular stagnation. Faster recovery of the USA economy and normalization of FED monetary policy through the cycle of increasing the key interest rate will contribute to further strengthening of the US dollar against the euro. It will significantly increase the burden of foreign debt servicing for highly indebted countries that have borrowed in US dollars. This is the case with Serbia. Continuation of ECB expansionary monetary policy would have a positive impact on real GDP growth in Serbia in 2017. Close to zero interest rates on the savings of citizens in Eurozone would negatively influence its future economic growth. Negative effects of such a policy will also be manifested in Serbia because the interest rates on savings in banks are also close to zero.

scholarly journals Macroeconomic Policy at a Crossroads

2021 ◽  
Vol 65 (7) ◽  
pp. 5-15
Author(s):  
A. Kholopov
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rates ◽  
Public Debt ◽  
Financial Stability ◽  
Macroeconomic Policy ◽  
Bank Lending ◽  
Central Banks ◽  
Fiscal Stimulus ◽  
Negative Interest Rates

The article examines macroeconomic policy options for advanced economies to respond to adverse shocks in the environment of very low interest rates and very high levels of public debt, when the scope for using conventional policy tools is limited. The standard transmission mechanism of monetary policy in the ELB conditions stops working normally, and the economy faces the “liquidity trap” effect. The deployment by central banks of unconventional monetary tools (forward guidance, quantitative easing, and negative interest rates) after global financial crisis was helpful in combatting the downturn, but carries risk of possible side effects. Large-scale purchases of financial assets lead to significant increase in central banks’ balance sheets, and this creates a threat to future financial stability and central bank independence. Negative interest rates can have detrimental effects on bank profitability and be contractionary through bank lending. There is a consensus that today fiscal policy has to play a major role in stabilizing the business cycle. But the effectiveness of conventional tools of discretional fiscal policy is uncertain because of long political lags and small spending multiplier. Existing automatic fiscal stabilizers are focused on social protection goals and not on macroeconomic stabilization. Thus, the newly proposed measures for rules-based fiscal stimulus (asymmetric semiautomatic stabilizers – tax or spending measures triggered by the crossing of some statistical threshold, e.g. a high unemployment rate) and unconventional fiscal policy (the use of consumption taxes to increase inflation expectations) have become the object of active discussion. Here lies the danger in the fusion of monetary and fiscal policy: central banks’ operations are becoming increasingly quasi-fiscal, aimed at financing budget deficit, and functions of monetary policy are proposed to assign to fiscal policy. Besides, the expansion of fiscal stimulus threatens financial stability in the future, as it leads to increase in public debt and narrows a country’s fiscal space.

Negative interest rates as a monetary policy tool

2020 ◽  
Vol 26 (8) ◽  
pp. 1731-1746
Author(s):  
D.A. Artemenko ◽  
I.I. Bychkova
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Developed Countries ◽  
Fund Raising ◽  
Situational Analysis ◽  
Policy Tool ◽  
Negative Interest Rates

Subject. We consider the application of negative interest rates by central banks of various countries, as a monetary policy tool. Objectives. We focus on reviewing the historical retrospect, potential risks, as well as positive and negative aspects of using negative interest rate instruments by developed countries. Methods. The study rests on the logical, systems, functional, and situational analysis, methods of grouping, and the monographic survey. Results. The use of negative interest rates as a monetary policy tool by financial regulators in various countries is a least-evil solution, which is aimed at improving the economy after the global economic crisis of 2008–2010. At present, positive and negative factors of the tools' impact on the financial sphere have been identified. In particular, the advantage is a balance between inflation and deflation, as the latter leads to a reduction in aggregate demand, an increase in unemployment, a fall in asset prices, and a slowdown in economic growth. The banking sector bears the risks of negative margin from operations involving fund-raising. The use of negative interest rates is possible, if other measures aimed at boosting economic growth are applied simultaneously. Conclusions. The findings can be used to investigate the negative interest rate instrument and evaluate its effectiveness. They can be helpful for financial market specialists.

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