It seemed at first like a great plan to monetary policy leaders. Global economic growth remains sluggish, but our ability to provide stimulus through lower interest rates is constrained by the lower bound of zero interest rates. Why not then simply break down this barrier and push interest rates into negative territory? Paying debtors for borrowing money from lenders – what could possibly go wrong? It turns out quite a lot. For not only are monetary policy makers increasingly discovering unintended consequences for their misguided actions, they have also now painted themselves into a very tight corner from which it now may be difficult to escape.
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