Zero Interest Rate Policy (ZIRP)
Zero Interest Rate Policy (ZIRP) is a monetary policy used by central banks to stimulate economic growth by setting the target interest rate to zero. This policy is used when the central bank believes that the economy is in a recession and needs to be stimulated. The central bank will set the target interest rate to zero, which means that banks will not have to pay interest on their deposits. This encourages banks to lend more money to businesses and consumers, which can help to stimulate economic growth.
History of ZIRP
The concept of ZIRP was first introduced in the early 1990s by the Bank of Japan. The Bank of Japan was looking for ways to stimulate the Japanese economy, which had been in a recession for several years. The Bank of Japan decided to set the target interest rate to zero, which meant that banks would not have to pay interest on their deposits. This policy was successful in stimulating the Japanese economy, and other central banks around the world began to adopt the policy.
The United States Federal Reserve adopted ZIRP in 2008 in response to the global financial crisis. The Federal Reserve set the target interest rate to zero in order to stimulate the economy and encourage banks to lend more money. This policy was successful in stimulating the economy, and the Federal Reserve kept the target interest rate at zero until 2015.
Comparison Table
| Country | Interest Rate |
|---|---|
| Japan | 0.00% |
| United States | 0.00% |
| United Kingdom | 0.75% |
| Germany | -0.50% |
| France | -0.40% |
Summary
Zero Interest Rate Policy (ZIRP) is a monetary policy used by central banks to stimulate economic growth by setting the target interest rate to zero. This policy was first introduced by the Bank of Japan in the early 1990s and has since been adopted by other central banks around the world. The United States Federal Reserve adopted ZIRP in 2008 in response to the global financial crisis. For more information about ZIRP, please visit the websites of the Bank of Japan, the United States Federal Reserve, and other central banks.
See Also
- Quantitative Easing
- Monetary Policy
- Interest Rate
- Inflation
- Deflation
- Fiscal Policy
- Central Bank
- Monetary Base
- Money Supply
- Currency Exchange Rate
