|
Zero Lower Bound Problem
The zero lower bound (ZLB) or zero nominal lower bound (ZNLB) is a macroeconomic problem that occurs when the short-term nominal interest rate is at or near zero, causing a liquidity trap and limiting the central bank's capacity for inflation targeting. The root cause of the ZLB is the issuance of paper currency by central banks, effectively guaranteeing a zero nominal interest rate and acting as an interest rate floor. Central banks cannot encourage spending by lowering interest rates, because people would simply hold cash instead. However, several central banks were able to reduce interest rates below zero; for example, the Czech National Bank estimates that the lower limit on its interest rate is below −1%. The problem of the ZLB returned to prominence with Japan's experience during the 1990s, and more recently with the subprime crisis. The belief that monetary policy under the ZLB was effective in promoting economy growth has been critiqued by Paul Krugman, Gauti Eggertss ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Liquidity Trap
A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt (financial instrument) which yields so low a rate of interest."John Maynard Keynes, Keynes, John Maynard (1936) ''The General Theory of Employment, Interest and Money'', United Kingdom: Palgrave Macmillan, 2007 edition, A liquidity trap is caused when people hold cash because they Expectation (epistemic), expect an adverse event such as deflation, insufficient aggregate demand, or war. Among the characteristics of a liquidity trap are interest rates that are close to zero lower bound and changes in the money supply that fail to translate into changes in inflation.Paul R. Krugman, Krugman, Paul R. (1998)"It's baack: Japan's Slump and the Return of the Liquidity Trap," Brookings Institution, Brookings Papers on Economi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Miles Kimball
Miles Spencer Kimball is an American economist who is currently the Eugene D. Eaton Jr. Professor of Economics at the University of Colorado Boulder. From 1987 to 2016, he was professor of economics and research professor of survey research at the University of Michigan. He is also a research associate of the National Bureau of Economics Research. Biography Kimball was born to Edward Lawrence Kimball and Evelyn Bee Madsen Kimball on August 17, 1960. He is the grandson of Spencer W. Kimball, the twelfth president of the Church of Jesus Christ of Latter-day Saints and great-nephew of chemist Henry Eyring. As a high school senior, Kimball took 9th place in the USA Math Olympiad. Kimball graduated with a bachelor's degree in economics from Harvard University in 1982. He then received a master's degree in linguistics from Brigham Young University in 1984. His Master's thesis was "Language, Linguistics and Philosophy: A Comparison of the Work of Roman Jakobson and the Later Wittgen ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Shadow Rate
The shadow rate is an interest rate in some financial models. It is used to measure the economy when nominal interest rates come close to the zero lower bound. It was created by Fischer Black in his final paper, "Interest Rates as Options". The shadow rate derives from Fischer Black's insight that currency is an option. If someone has money, the person can either (1) spend it today or (2) not spend it and have money tomorrow. Thus, when loans would return less money than was initially loaned out, investors will choose to "exercise the option" and not loan their money. Thus, the nominal short-term interest rate is always greater than or equal to zero. In Black's model, the shadow nominal short-term rate is what the nominal short-term rate would be if it was allowed to go below the zero lower bound. When the shadow nominal short-term rate is positive, the nominal short-term rate is equal to the shadow rate. But when the shadow short-term rate is negative — such as during deflat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Secular Stagnation
In economics, secular stagnation is a condition when there is negligible or no economic growth in a market-based economy. In this context, the term ''secular'' means long-term (from Latin "saeculum"—century or lifetime), and is used in contrast to ''cyclical'' or ''short-term''. It suggests a change of fundamental dynamics which would play out only in its own time. The concept was originally put forth by Alvin Hansen in 1938. According to ''The Economist'', it was used to "describe what he feared was the fate of the American economy following the Great Depression of the early 1930s: a check to economic progress as investment opportunities were stunted by the closing of the frontier and the collapse of immigration". Warnings of impending secular stagnation have been issued after all deep recessions since the Great Depression, but the hypothesis has remained controversial. Definition The term secular stagnation refers to a market economy with a chronic (secular or long-term) lack ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Zero Interest-rate Policy
Zero interest-rate policy (ZIRP) is a macroeconomic concept describing conditions with a very low nominal interest rate, such as those in contemporary Bank of Japan, Japan and in the Federal Reserve System, United States from December 2008 through December 2015 and again from March 2020 until March 2022 amid the COVID-19 pandemic. ZIRP is considered to be an Monetary policy#Unconventional monetary policy at the zero bound, unconventional monetary policy instrument and can be associated with slow economic growth, deflation and Deleveraging, deleverage. ZIRP could also describe an interest-free economy. Overview Under ZIRP, the central bank maintains a 0% nominal interest rate. The ZIRP is an important milestone in monetary policy because the central bank is typically no longer able to reduce nominal interest rates. ZIRP is very closely related to the problem of a liquidity trap, where nominal interest rates cannot adjust downward at a time when savings exceed investment. Howe ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Negative Interest Rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized. The interest rate has been characterized as "an index of the preference . . . for a dollar of present ncomeover a dollar of future income". The borrower wants, or needs, to have money sooner, and is willing to pay a fee—the interest rate—for that privilege. Influencing factors Interest rates vary according to: * the government's directives to the central bank to accomplish the government's goals * the currency of the principal sum lent or borrowed * the term to matu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Negative Interest On Excess Reserves
Negative may refer to: Science and mathematics * Negative number * Minus sign (−), the mathematical symbol * Negative mass * Negative energy * Negative charge, one of the two types of electric charge * Negative (electrical polarity), in electric circuits * Negative result (other) * Negative lens, in optics Photography * Negative (photography), an image with inverted luminance or a strip of film with such an image * Original camera negative, the film in a motion picture camera which captures the original image * Paper negative, a negative image printed on paper used to create the final print of a photograph Linguistics * A negative answer, commonly expressed with the word ''no'' * A type of grammatical construction; see affirmative and negative *A double negative is a construction occurring when two forms of grammatical negation are used in the same sentence. Music * Negative (Finnish band), a Finnish band established in 1997 * Negative (Serbian band) ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Unit Of Account
In economics, unit of account is one of the functions of money. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. Money acts as a standard measure and a common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is necessary for developing efficient accounting systems. Economics Unit of account in economics allows a somewhat meaningful interpretation of prices, costs, and profits, so that an entity can monitor its own performance. It allows shareholders to make sense of its past performance and have an idea of its future profitability. The use of money, as a relatively stable unit of measure, can tend to drive market economies toward efficiency. Historically, prices were of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Digital Currency
Digital currency (digital money, electronic money or electronic currency) is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency. Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored-value card. Digital currencies exhibit properties similar to traditional currencies, but generally do not have a classical physical form of fiat currency historically that can be held in the hand, like currencies with printed banknotes or minted coins. However, they do have a physical form in an unclassical sense coming from the computer to computer and computer to human interactions and the information and processing power of the servers that store and keep track o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Helicopter Money
Helicopter money is a proposed monetary policy for inflation targeting, sometimes suggested as an alternative to quantitative easing (QE) when the economy is in a liquidity trap (when interest rates near zero and the economy remains in recession). Although the original idea of helicopter money describes central banks making payments directly to individuals, economists have used the term "helicopter money" to refer to a wide range of different policy ideas, including the "permanent" monetization of budget deficits with the additional element of attempting to shock beliefs about future inflation or nominal GDP growth, in order to change expectations. A second set of policies, closer to the original description of helicopter money, and more innovative in the context of monetary history, involves the central bank making direct transfers to the private sector financed with base money, without the direct involvement of fiscal authorities. This has also been called a citizens' dividend ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inflation Targeting
In macroeconomics, inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation. The central bank uses interest rates as its main short-term monetary instrument. An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively. The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation. The first three countries to implement fully-fledged inflation targeting were New Zealand, Canada and the United Kingdom in the early 1990s, although Germany had adopted many elements of inflati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
