Economics
IMF Staff Floats Dual Money to Allow Much Deeper Negative Rates
An historic ten pfennig coin sits inside an emergency box reading "Smash for Cash" at the Deutsche Bundesbank's money museum in Frankfurt.
Photographer: Alex Kraus/BloombergThis article is for subscribers only.
Ten years after the financial crisis, central bank interest rates remain near record lows and below zero in many countries, so the question is how well monetary policy would be able to respond to counter any future economic downturn.
One option could be electronic money issued in tandem with regular cash, economists at the International Monetary Fund wrote on the group’s blog. Cash, which can be held interest free, offers a way around negative rates, but electronic money issued by a central bank can’t be stuffed under any mattress.