Originally published on by Bruegel Institute. Link to original report( < 1 min)
The original paper is available on the European Parliament’s webpage, as part of a series of papers on “Low for Longer: Effects of Prolonged Negative Interest Rates”. Copyright remains with the European Parliament at all times.
Several central banks, including the European Central Bank since 2014, have added negative policy rates to their toolboxes after exhausting conventional easing measures. It is essential to understand the effects on the economy of prolonged negative rates. This paper explores the potential effects (and side effects) of negative rates in theory and examines the evidence to determine what these effects have been in practice in the euro area.
This paper was prepared for the European Parliament’s Committee on Economic and Monetary Affairs (ECON) as an input to the Monetary Dialogue of 21 June 2021 between ECON and the President of the European Central Bank.