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If Interest Rates Go Negative . . . Or, Be Careful What You Wish For

Author

Listed:
  • Kenneth D. Garbade
  • James J. McAndrews

Abstract

The United States has slid into eight recessions in the last fifty years. Each time, the Federal Reserve sought to revive economic activity by reducing interest rates (see chart below). However, since the end of the last recession in June 2009, the economy has continued to sputter even though short-term rates have remained near zero. The weak recovery has led some commentators to suggest that the Fed should push short-term rates even lower?below zero?so that borrowers receive, and creditors pay, interest.

Suggested Citation

  • Kenneth D. Garbade & James J. McAndrews, 2012. "If Interest Rates Go Negative . . . Or, Be Careful What You Wish For," Liberty Street Economics 20120829, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86827
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    File URL: https://libertystreeteconomics.newyorkfed.org/2012/08/if-interest-rates-go-negative-or-be-careful-what-you-wish-for.html
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    Cited by:

    1. Fabian Schär, 2021. "Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets," Review, Federal Reserve Bank of St. Louis, vol. 103(2), pages 153-174, April.
    2. Violeta A. Gutkowski, 2021. "Lockdown Responses to COVID-19," Review, Federal Reserve Bank of St. Louis, vol. 103(2), pages 127-151, April.
    3. Evan Karson & Christopher J. Neely, 2021. "More Stories of Unconventional Monetary Policy," Review, Federal Reserve Bank of St. Louis, vol. 103(2), pages 207-270, April.
    4. Maria E. Canon & Limor Golan & Cody A. Smith, 2021. "Understanding the Gender Earnings Gap: Hours Worked, Occupational Sorting, and Labor Market Experience," Review, Federal Reserve Bank of St. Louis, vol. 103(2), pages 175-205, April.
    5. McAndrews, James J., 2020. "The case for cash," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).

    More about this item

    Keywords

    Negative interest rates;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services
    • G1 - Financial Economics - - General Financial Markets

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