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Negative Interest Rates Effect Economic Stability
Mälardalen University, School of Business, Society and Engineering.
Mälardalen University, School of Business, Society and Engineering.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Today's monetary policy is a historic one, where the introduction of negative interest

rates has started a new "age" of unconventional monetary policy and some argue that

there is a need for further unconventional monetary tools. The purpose of this thesis is

to analyze negative interest rates, how they came to be, what long-term eect they have

on economic stability and if its possible to get out. We do this by analyzing existing

theoretical and empirical research, including a theoretical model based on household

consumption, a cost of money function and an illustration of the liquidity trap. Thereby

the thesis concludes that the short term positive eects of negative interest rate policy

get exhausted in the long-term as the negative eects increase over time, thus creating

an environment of excessive borrowing both by consumers and governments that might

lead to instability and economic downturn in the long-term. Furthermore, the negative

interest rate policy is creating a diculty of getting out of the negative interest rate

environment because the consumers and the rms have gotten used to the "cheap money"

and might have hard time nancing day to day operations in normal interest rate world.

Place, publisher, year, edition, pages
2018. , p. 53
Keywords [en]
negative interest rates, central banks, monetary policy
National Category
Economics
Identifiers
URN: urn:nbn:se:mdh:diva-40911OAI: oai:DiVA.org:mdh-40911DiVA, id: diva2:1247417
Subject / course
Economics
Supervisors
Examiners
Available from: 2018-09-18 Created: 2018-09-12 Last updated: 2018-09-18Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
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Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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