Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money

Katrin Assenmacher and Signe Krogstrup

No 2018/191, IMF Working Papers from International Monetary Fund

Abstract: Monetary policy space remains constrained by the lower bound in many countries, limiting the policy options available to address future deflationary shocks. The existence of cash prevents central banks from cutting interest rates much below zero. In this paper, we consider the practical feasibility of recent proposals for decoupling cash from electronic money to achieve a negative yield on cash which would remove the lower bound constraint on monetary policy. We discuss how central banks could design and operate such a system, and raise some unanswered questions.

Keywords: WP; currency system; unit of account; cash yield; cash payment; De-bundling cash; Zero lower bound; Monetary policy framework; Dual local currency regime; Legal tender; cash price; handling company; cash amount; Currencies; Digital currencies; Negative interest rates; Central bank policy rate; Global (search for similar items in EconPapers)
Pages: 31
Date: 2018-08-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=46076 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2018/191

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().