• AEA in the news
  • August 14, 2017

Reconsidering negative interest rates

The Marriner S. Eccles Federal Reserve Board Building in Washington D.C.

R.Babakin

The Telegraph featured a paper in the latest issue of the Journal of Economic Perspectives in an article about how central banks should consider cutting interest rates below zero in preparing for the next recession. The paper, by Harvard economist Kenneth Rogoff, says that as more people use electronic payments, there’s less concern that negative interest rates will result in a massive flight into paper currency. “Fundamentally, there is no practical obstacle to paying negative (or positive) interest rates on electronic currency and, as we shall see, effective negative rate policy does not require eliminating paper currency,” Rogoff said.