On the normality of negative interest rates

We argue that a negative interest-rate policy (NIRP) can be an effective tool for macroeconomic stabilization. We first discuss how implementing negative rates on reserves held at a central bank does not pose any theoretical difficulty, with a reduction in rates operating in exactly the same way when rates are positive or negative, and show that this is compatible with an endogenous-money point of view. We then propose a simplified stock–flow …