Prepare for negative interest rates in the next recession, says top economist



That would be substantially better than trying to use QE or forward guidance as central bankers have attempted in recent years.

“Alternative monetary policy instruments such as forward guidance and quantitative easing offer some theoretical promise for addressing the zero bound,” he said, in the paper which is titled ‘Dealing with Monetary Paralysis at the Zero Bound’.

“But these policies have now been deployed for some years – in the case of Japan, for more than two decades – and at least so far, they have not convincingly shown an ability to decisively overcome the problems posed by the zero bound.”



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