IMF Working Papers

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

By Katrin Assenmacher, Signe Krogstrup

August 27, 2018

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Katrin Assenmacher, and Signe Krogstrup. Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Banking, Central bank policy rate, Currencies, Digital currencies, Financial services, Monetary policy, Money, Negative interest rates, Technology, Zero lower bound

Keywords: Cash amount, Cash payment, Cash price, Cash yield, Central bank policy rate, Currencies, Currency system, De-bundling cash, Digital currencies, Dual local currency regime, Global, Handling company, Legal tender, Monetary policy framework, Negative interest rates, Unit of account, WP, Zero lower bound

Publication Details

  • Pages:

    31

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/191

  • Stock No:

    WPIEA2018191

  • ISBN:

    9781484370025

  • ISSN:

    1018-5941

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