Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260307 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020:15
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
Negative interest rates were once seen as impossible outside the realm of economic theory. However, several central banks have recently adopted negative policy rates. The Federal Reserve is coming under increasing pressure to follow suit in the wake of the coronavirus crisis. This paper investigates the actual effects of negative interest rates using the Swedish experience from 2015 to 2019. The Swedish Riksbank was one of the first central banks to introduce a negative interest rate in 2015 and the first central bank to abandon a negative rate in 2019. We find that negative rates had a modest effect on consumer price inflation due to globalization, but significant effects on the exchange rate and domestic asset prices, thus fostering financial imbalances. We conclude by discussing the implications of our results for larger economies such as the United States.
Subjects: 
Monetary policy
inflation targeting
Sweden
United States
negative interest rates
forward guidance
quantitative easing
JEL: 
D78
E40
E43
E47
E50
E52
E65
Document Type: 
Working Paper

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