Thread by @atanaspekanov

Silvana Tenreyro has been arguing for a while that negative interest rates are a *feasible* AND *efficient* way to stimulate the economy and this speech from her is the best summary so far I have seen about it. Main points are: 1/
theguardian.com/business/2021/…

"The financial-market channels of monetary policy transmission have worked effectively under negative rates in other countries". That is, negative rates lower cost of capital,depreciate the exchange rate & increase asset prices, all of which increase investment and consumption 2/

"The evidence on the bank lending channel is that negative interest rates have been effective in boosting lending & activity, without clear evidence that they have damaged bank profits"
Negative rates increase lending and are not found to be the cause of low profits for banks 3/

The speech summarizes evidence from areas that used negative rates - Denmark, Euro area, Switzerland, Sweden, Japan, and argues most of evidence points in favour of this. She also discusses how this squares theoretically with Brunnermeier & Koby (2018) and the reversal rate
4/

Some of the evidence on the effects of negative interest rates have been published in ECB Bulletins last year and can be found in the 300 pages by Rostagno et. al (2019) paper; very brief summary here: 5/

https://twitter.com/atanaspekanov/status/1260499151852392450

Overall very nice speech with a strong message why negative interest rates might work. 6/

Link to the speech: bankofengland.co.uk/-/media/boe/fi…