کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5069685 | 1476993 | 2013 | 6 صفحه PDF | دانلود رایگان |
- Review traditional HJM without cash.
- Extend the HJM to include trading in cash, using a convenience yield.
- Show that an HJM model with cash allows negative interest rates with positive probability.
Unconventional monetary policy tools are based on the belief that there exists a zero-lower bound on interest rates. This paper argues, based on economic theory and the empirical evidence, that this belief is a myth and not a reality. It is shown that a negative default-free spot rate of interest is consistent with an arbitrage-free term structure evolution in a competitive and nearly frictionless market. It is not frictionless to the extent that consumers, firms, non-bank financial institutions, and banks have some realistic constraints imposed on their trading activities.
Journal: Finance Research Letters - Volume 10, Issue 4, December 2013, Pages 151-156