Arbeitspapier
Negative interest rates, capital flows and exchange rates
This paper develops a dynamic general equilibrium model with two currencies to study the effect of negative interest rates on domestic money demand and exchange rates. Money demand for a currency depends on the relative ratio of the money market rate and the deposit rate of the central bank. If agents choose to hold only domestic currency, a decrease in the deposit rate of the central bank will not affect the exchange rate. If agents choose to hold both currencies, a decrease in the deposit rate will cause an appreciation (depreciation) if the money market rate decreases to a larger (smaller) extent. If agents are subject to bank deposit rates that are sticky below zero, then a decrease of the central bank deposit rate leads to a depreciation of the currency regardless of the size of the effect on the money market rate.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 351
- Klassifikation
-
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Foreign Exchange
- Thema
-
monetary policy
negative interest rates
exchange rates
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Ruprecht, Romina
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Zurich, Department of Economics
- (wo)
-
Zurich
- (wann)
-
2020
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Ruprecht, Romina
- University of Zurich, Department of Economics
Entstanden
- 2020
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