Nov 10, 2016
from 01:00 PM to 02:00 PM
|Where||Lecture Theatre 3, Cambridge Judge Business School|
|Contact Name||Kat Ndrepepaj|
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Peter Conti-Brown, The Wharton School of the University of Pennsylvania. Peter studies central banking, financial regulation, and public finance, with a particular focus on the history and policies of the US Federal Reserve System. He is author of the book The Power and Independence of the Federal Reserve (Princeton University Press 2016), the editor of two other books, and author or co-author of a dozen articles on central banking, financial regulation, and bank corporate governance.
Title: Going Negative: The Legal, Institutional, and Political Case for Negative Interest Rates at the U.S. Federal Reserve
Peter Conti-Brown, The Wharton School of the University of Pennsylvania
and Miles Kimball, University of Colorado-Boulder
For nearly a decade, global central banks have battled a “new normal” of low inflation and low growth. To combat these dynamics, some central banks—the Bank of Japan, the Swiss National Bank, and the European Central Bank, among others—have pursued a policy of dropping their target interest rates below the zero lower bound. Conspicuously absent from this group is the Federal Reserve, despite facing similar economic headwinds that suggest that negative interest rates could be more effective than other policies the Fed has pursued.
In this paper, we provide the not merely the economic case for negative interest rates (although we summarize the evidence and theory), but discuss the main barriers that face the Fed in adopting this policy: law, politics, and institutions. We discuss the technical landscape that the Fed will encounter, and discuss the path the Fed can pursue well short of seeking legislative amendment to the Federal Reserve Act.