In this article we will talk about negative interest and the role it plays in economic downturns.
It is known that the interest rate is the interest rate fixed by the central bank of any country, which pays on bank deposits with it and gets them to borrow from it. Economic conditions such as an economic downturn.
Aggregate demand in the country falls, prices fall, corporate productivity decreases, workers are laid off, and unemployment rates increase. At this time, central banks may resort to lowering the interest rate below zero, then any bank that deposits its money in the central bank will have to pay a percentage to the central bank, in which case the banks may prefer to lend its money to companies and individuals rather than deposit it and pay an interest rate on her.
As lowering the interest rate below zero will make borrowing easier, increase demand for loans, stimulate spending and investment, revive the economy, end deflation and possibly raise the rate of inflation naturally and beneficial to the economy. To save more money under negative interest, which means reduce their spending.
This runs counter to the main objectives of the negative interest policy, which aims to stimulate spending and investment more so that production moves again.
Finally, I hope you will benefit from this article
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