Modern Interest Rate Policy and the Phenomenon of Negative Interest Rates

Журнал «Дайджест-Финансы»
т. 22, вып. 4, декабрь 2017

Получена: 12.09.2016

Получена в доработанном виде: 17.10.2016

Одобрена: 01.12.2016

Доступна онлайн: 19.12.2017

Рубрика: BANKING

Коды JEL: E51, E52, E58

Страницы: 392–399


Burlachkov V.K. Moscow State Institute of International Relations (University) of Ministry of Foreign Affairs of Russian Federation, Moscow, Russian Federation 

Importance The target interest rate is the main tool of the interest rate policy. Deflationary trends in leading economies undermined interest rates of central banks. It resulted in the phenomenon of negative interest rates on commercial banks' deposits.
Objectives The research focuses on the specifics of the modern interest rate policy of central banks in leading economies. I also identify what caused negative interest rates and outline a methodological framework for the interest rate policy in the Russian economy.
Methods The research is based on methods of logic and statistical analysis.
Results I unveil distinctions of central banks' interest rate policies, while the monetary mechanism of the modern economy evolves. I unfold the specifics of regulating interest rates with interest rate corridors. The article highlights distinctions in setting interest rates and the way they influence lending and liquidity. I also underpin the nexus between the formation of interest rates and leverage level of the economy. Interest rates were found to impact deflationary trends.
Conclusions and Relevance The specifics of the modern interest rate policies of central banks depends on the way the monetary mechanism evolves, i.e. the mechanism of the money supply. As central banks implemented payment systems, cash in correspondent accounts of commercial banks with central banks grew even more important. However, in targeting the rate on these reserves, central banks are constrained to influence interest rates on commercial bank's loans. That is why central banks are unable to effectively stimulate a growth in bank lending during the cyclical recession and have to apply an unconventional method to increase the money supply.

Ключевые слова: interest rate policy, money mechanism, interest rate corridor, deflation, quantitative easing

Список литературы:

  1. Borio C. Revisiting Three Intellectual Pillars of Monetary Policy Received Wisdom. URL: Link
  2. Rachel L., Smith T. Secular Drivers of the Global Real Interest Rate. Bank of England Staff Working Paper, 2015, no. 571. URL: Link
  3. Thwaites G. Why are Real Interest Rates So Low? Secular Stagnation and the Relative Price of Investment Goods. Bank of England Staff Working Paper, 2015, no. 564. URL: Link
  4. McLeay M., Radia A., Thomas R. Money Creation in the Modern Economy. Bank of England Quarterly Bulletin, 2014, Q1. URL: Link
  5. Carpenter S., Demiralp S. Money, Reserves and the Transmission of Monetary Policy: Does the Money Multiplier Exist? URL: Link
  6. Bindseil U. Monetary Policy Operations and the Financial System. Oxford, Oxford University Press, 2014, 320 p.
  7. Bindseil U. The Operational Target of Monetary Policy and the Rise and Fall of the Reserve Position Doctrine. ECB Working Paper Series, 2004, no. 372, 44 p. URL: Link
  8. Jakab Z., Kumhof M. Banks are not Intermediaries of Loanable Funds – and Why This Matters. URL: Link
  9. Werner R. Can Banks Individually Create Money Out of Nothing? – The Theories and the Empirical Evidence. International Review of Financial Analysis, 2014, vol. 36, pp. 1–19. URL: Link
  10. Werner R. How do Banks Create Money, and Why Can Other Firms not Do the Same? An Explanation for the Coexistence of Lending and Deposit-taking. International Review of Financial Analysis, 2014, vol. 36, pp. 71–77. URL: Link
  11. Kashyap A., Stein J. The Impact of Monetary Policy on Bank Balance Sheets. Carnegie-Rochester Conference Series on Public Policy, 1995, no. 42, pp. 151–195.
  12. Kashyap A., Stein J. What Do a Million Observations on Banks Say about the Transmission of Monetary Policy. The American Economic Review, 2000, vol. 90, no. 3, pp. 407–428.
  13. Farag M., Harland D., Nixon D. Bank Capital and Liquidity. Bank of England Quarterly Bulletin, 2013, vol. 53, iss. 3, pp. 201–215.
  14. Bowdler C., Radia A. Unconventional Monetary Policy: The Assessment. Oxford Review of Economic Policy, 2012, vol. 28, no. 4, pp. 603–621. URL: Link
  15. Christiano L., Eichenbaum M., Evans C. Monetary Policy Shocks: What Have We Learned and to What End? NBER Working Paper, 1998, no. 6400, 95 p.
  16. Bridges J., Thomas R. The Impact of QE on the UK Economy: Some Supportive Monetarist Arithmetic. Bank of England Working Paper, 2012, no. 442, 52 p. URL: Link
  17. Fullwiler S., Wray L. Quantitative Easing and Proposals for Reform of Monetary Policy Operations. Levy Economic Institute Working Paper, 2010, no. 645, 35 p. URL: Link
  18. Mohanty M.S. The Transmission of Unconventional Monetary Policy to the Emerging Markets: An Overview. BIS Papers, 2014, no. 78, 24 p. URL: Link
  19. Mishra P., Montiel P. How Effective is Monetary Transmission in Low-Income Countries? A Survey of the Empirical Evidence. IMF Working Paper, 2012, no. WP/12/143, 47 p. URL: Link
  20. Fawley B., Neely C. Four Stories of Quantitative Easing. Federal Reserve Bank of St. Louis Review, 2013, vol. 95, iss. 1, pp. 51–88.
  21. Bernhardsen T., Kloster A. Misunderstood Central Bank Reserves. Norges Bank Economic Commentaries, 2012, no. 1. URL: Link
  22. Fowler S. The Monetary Fifth Column: The Eurodollar Threat to Financial Stability and Economic Sovereignty. Vanderbilt Journal of Transnational Law, 2014, vol. 47, pp. 825–860.
  23. Fullwiler S. Setting Interest Rates in the Modern Money Area. Journal of Post Keynesian Economics, 2006, vol. 28, no. 3, pp. 496–525.

Посмотреть другие статьи номера »


ISSN 2311-9438 (Online)
ISSN 2073-8005 (Print)

Свежий номер журнала

т. 23, вып. 3, сентябрь 2018

Другие номера журнала