Effective lower bound: Difference between revisions
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imported>Doug Williamson (Create page. Sources: Linked pages and BIS webpage https://www.bis.org/publ/work804.pdf) |
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* [[Central bank reserves]] | * [[Central bank reserves]] | ||
* [[Discount rate]] | * [[Discount rate]] | ||
* [[Inflation target]] | |||
* [[Interest on excess reserves]] | * [[Interest on excess reserves]] | ||
* [[Interest rate]] | * [[Interest rate]] | ||
Latest revision as of 05:51, 23 January 2022
Monetary policy - interest rates.
(ELB).
Effective lower bound is a development of the Zero lower bound assumption that monetary policy interest rates should not be, or cannot be, lower than zero.
The effective lower bound takes into account the storage and security costs of holding physical cash.
Accordingly the effective lower bound would be negative, rather than zero.
This is the rate at which it becomes profitable for financial institutions to exchange central bank reserves for cash.
