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Main » 2019 » April » 24 » The IMF has developed a scheme that will allow to work negative interest rates
The IMF has developed a scheme that will allow to work negative interest rates


For a long period of time the global economy and financial facing serious challenges, which lead to changes. For example, negative interest rates were introduced, which did not have the desired effect. Against this background, the IMF has developed a new system by which the interest rate with a negative balance can earn and bring the expected benefits.





Earlier, to deal with the financial crisis, central banks have used an easing of monetary policy, namely the reduced interest rates by 3-6%, but now rates are at its lowest level, rather close to zero, thus leaving no room for maneuverability . 

But now the strategy has changed, and the IMF said that rates could go on the negative side, you need a sound approach. Everyone knows that when the stakes have a negative balance, then to be their holder is not profitable, because it is better to give preference to cash, right percentage will not need to pay. 

On the other hand, a significant amount is not so and profitable store, because it is associated with additional complications. But this in itself makes the possibility of a significant reduction of interest rates in negative territory impossible. Against this background, the following is possible solution to the problem - to give up cash. 

This raises another question - the popularity of cash, that is not so easy to take and give up their existence, because in most countries cash have an important role. Exception - Sweden. 
What came up with the IMF? 
The IMF has put forward the idea of making cash just as expensive, that will make it possible to reduce interest rates below zero. To do this, the separation of the central bank monetary base into two types - cash and electronic. 

Electronic currency should be emitted only in electronic form, and that it can be used to pay the interest rate, while the cash currency will be the exchange rate - the conversion rate - about e-currency. 

It should be noted that this conversion ratio were the leading point of the proposal. That is, by setting a negative interest rate for the electronic exchange, the regulator will need to create optimal conditions for conversion ratio decreased at the same rate as the negative interest rate for e-currency. Against this background, the cash value would decrease relative to the electron.

For clarity, we can use the following example, if the deposit rate is 3%, the conversion ratio of currency into electronic decrease from 1 to 0.97 (per year) for conditional 100 dollars. 

Where you need support from the outside, that is, stores will also have to go on a double billing of goods - electronic currency and cash. With this there should be no difficulty, as practiced in some countries for a long time like that, and it takes place in the calculation of the national currency, and the border. 

Thus, the idea is quite interesting and the IMF has the right to exist, but may encounter difficulties in the implementation of life as not all countries have lower rates and not every government is ready to reduce them below zero.


Analytics WELTRADE




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