NEGATIVE INTEREST RATES AS AN INSTRUMENT OF UNCONVENTIONAL MONETARY POLICY AND THEIR IMPACT ON THE ECONOMY AND FINANCIAL MARKETS

Анотація

This article presents a study of negative interest rate policy (NIRP) since the 2008-2009 global financial crisis in developed countries with powerful central banks and bank-oriented financial systems. In particular, NIRP and its impact on the economy and financial markets of Denmark, Switzerland, Sweden, the Eurozone, and Japan were studied. It was revealed that when applying this tool, the Central Banks were guided by different goals. The ECB and the Bank of Japan applied negative rates to expand their unconventional monetary policy measures, and Denmark, Sweden, Switzerland to overcome the consequences of the debt crisis in the Eurozone. The goal of negative interest rates in Denmark and Switzerland was to adjust the exchange rate and curb speculation, and in the Eurozone, Sweden, and Japanto combat deflationary trends. A negative interest rate policy can have both positive and negative consequences for the economy. In particular, in addition to reducing the cost of borrowing, this policy also helps to weaken the country's exchange rate, making it less attractive for investment than in other currencies, but at the same time, a weaker currency gives a country's exports a competitive advantage and increases import costs. Summarizing, we can say that negative interest rates play an important role in stimulating changes in money market rates in order to stimulate inflation and economic growth, and is also one of the main tools for maintaining the stability of the exchange rate. But negative rates put downward pressure on the entire yield curve and narrow the margins that financial institutions make from lending. If ultra-low rates are used for too long, they severely damage the health of financial institutions, they can reduce the volume of lending to private enterprises and harm the economy. In general, negative interest rates have achieved their goals, although they have disadvantages and risks. In addition, to solve specific problems in order to support the transmission of monetary policy, it is advisable to apply microprudential and supranational and national macroprudential regulations in order to enhance the effectiveness and efficiency of non-traditional negative interest rates and monetary policy in general.

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