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The Interest Rate Unbound?
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The Interest Rate Unbound?

Jean-Pierre Danthine
Brookings Institution, 2016
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Editorial Rating

7

Qualities

  • Analytical
  • Innovative
  • Well Structured

Recommendation

Negative real interest rates, although they sound counterintuitive, have existed at various times in history. Recently, central banks in Switzerland, Denmark, Sweden, Japan and the euro zone have adopted such policies either to manage exchange rates or to provide stimulus in today’s low-growth environment. Economist Jean-Pierre Danthine examines the impacts of such policies. Although his paper is rather technical and would have benefited from editing for clarity, it provides some good nuggets of information about negative rates’ impacts on society. getAbstract suggests Danthine’s eye-opening report to investors, policy makers and executives.

Take-Aways

  • Central banks in Sweden, Denmark, Switzerland, Japan and the euro zone have initiated negative interest rate policies.
  • Due to the way the policies have been implemented, practically speaking, retail bank depositors haven’t yet felt the sting of negative rates.
  • If negative interest rates are low enough, people might resort to measures such as hoarding paper currency.

About the Author

Jean-Pierre Danthine is president of the Paris School of Economics.

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