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Understanding Zero-bound The term ‘zero-bound’ refers to the lowest possible interest rate a central bank can impose on short-term borrowing, commonly known as the benchmark interest rate. This limit is important because, when a country’s economy experiences a downturn, a central bank may lower its interest rate to stimulate economic
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Introduction to Zero-Bound Interest Rates Zero-bound interest rates refer to a conventional wisdom that short-term interest rates cannot go below zero. In essence, it implies borrowers would pay for the privilege of receiving a loan or banks demand payment for accepting cash deposits. This notion might seem illogical as interest
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