Negative Interest Rate Policy (NIRP)
Negative Interest Rate Policy (NIRP) is a monetary policy tool used by central banks to stimulate economic growth. It involves setting the interest rate on certain financial instruments below zero, which encourages banks to lend money to businesses and consumers, thus increasing the money supply and stimulating economic activity. NIRP is a relatively new tool, having only been used in a few countries since the global financial crisis of 2008.
History of NIRP
NIRP was first introduced in 2009 by the Bank of Japan, in an effort to stimulate economic growth in the wake of the global financial crisis. Since then, it has been used by a number of other central banks, including the European Central Bank, the Swiss National Bank, and the Bank of England. NIRP has been used in a variety of ways, including to encourage banks to lend money to businesses and consumers, to reduce the cost of borrowing, and to reduce the cost of government debt.
Comparison of NIRP and Other Monetary Policy Tools
Monetary Policy Tool | Interest Rate | Effect on Money Supply |
---|---|---|
NIRP | Below Zero | Increases |
Quantitative Easing | Near Zero | Increases |
Open Market Operations | Near Zero | Decreases |
Summary
Negative Interest Rate Policy (NIRP) is a relatively new monetary policy tool used by central banks to stimulate economic growth. It involves setting the interest rate on certain financial instruments below zero, which encourages banks to lend money to businesses and consumers, thus increasing the money supply and stimulating economic activity. NIRP has been used in a variety of ways, including to encourage banks to lend money to businesses and consumers, to reduce the cost of borrowing, and to reduce the cost of government debt. For more information on NIRP and other monetary policy tools, please visit the websites of the Bank of Japan, the European Central Bank, the Swiss National Bank, and the Bank of England.
See Also
- Quantitative Easing
- Open Market Operations
- Monetary Policy
- Interest Rate
- Money Supply
- Central Bank
- Fiscal Policy
- Inflation
- Deflation
- Economic Growth