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Negative rates of central banks as a factor in the transformation of the global financial system in crisis anticipation

Vol. 26, Iss. 2, FEBRUARY 2020

Received: 24 October 2019

Received in revised form: 20 November 2019

Accepted: 4 December 2019

Available online: 28 February 2020

Subject Heading: Banking

JEL Classification: G01, G14, G18, G21

Pages: 316–326

Evsin M.Yu. Financial University under Government of Russian Federation, Lipetsk Branch, Lipetsk, Russian Federation

Rybina I.A. Financial University under Government of Russian Federation, Lipetsk Branch, Lipetsk, Russian Federation

Subject We consider the practice of applying negative interest rates by central banks of Switzerland, Sweden, Denmark, Japan and the Eurozone countries as a whole, and assess the effects of such policies.
Objectives The purpose is to review emerging trends in the global financial system regarding the formation of interest rates, and to study preconditions for the emergence prerequisites for emergence of a new financial crisis.
Methods The methodology involves correlation of inflation level, negative interest rates and GDP growth. We apply normative and integrated approaches to the study of interest rate formation by central banks at the present stage, general scientific and special methods of scientific knowledge, i.e. retrospective, systems and functional-structural analysis, observation; instrumental methods of grouping, sampling, comparison and generalization, evolutionary and dynamic analysis.
Results The main problem faced by central banks is the lack of effective tools. This gave rise to the transformation of views on formation and implementation of monetary policy and, as a consequence, the introduction of negative interest rates. We present a logical model for negative interest rates policy implementation. In the short term, such a policy can yield positive results (GDP growth), though by a insignificant amount.
Conclusions and Relevance The use of negative interest rates in the activities of world’s central banks is a serious prerequisite for crisis that can cause a transformation of the entire global financial system.

Keywords: negative interest rate, global financial system, central bank, financial crisis, monetary policy


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