The Dangerous Ineffectiveness of Negative Interest Rates

Rossi, Sergio

doi:10.4337/roke.2019.02.07

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Journal article

The Dangerous Ineffectiveness of Negative Interest Rates : the Case of Switzerland

Rossi, Sergio Université de Fribourg

2019

Published in:

Review of Keynesian Economics. - Edward Elgar Publishing Ltd. - 2019, vol. 7, no. 2, p. 220-232

English This paper argues that the negative interest rate adopted by the Swiss National Bank in 2015 has elicited a series of negative consequences across the Swiss economy. It has led an increasing number of agents to invest their savings in the real-estate market, whose prices have overheated, threatening the eruption of a housing crisis. It has also induced a number of financial institutions to turn to riskier businesses in an attempt to continue to earn some returns, thereby increasing financial fragility at systemic level. The paper suggests that a small Tobin tax on all Swiss-franc purchases may contribute to the support of domestic economic activities much better than negative rates of interest.

Faculty

Faculté des sciences économiques et sociales et du management

Department

Département d'économie politique

Language