FEDS Paper: On the Negatives of Negative Interest Rates

Aleksander Berentsen, Hugo van Buggenum, Romina RuprechtMajor central banks remunerate reserves at negative rates (NIR). To study the long-run effects of NIR, we focus on the role of reserves as intertemporal stores of value that are used to settle interbank liabilities. We construct a dynamic general equilibrium model with commercial banks holding reserves and funding investments with retail deposits.


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