4 reasons
for betting on negative deposit rate
1) In the Picture the 3mo Euro CPI, a
nervous but leading series.
2) No theoretical reason for saving ammunition
for later (only the contrary, the Central Bank should do the most before too
late, especially if it’s about to run out of weapons)
3) Draghi is somehow able to lead that
messy board
Interesting paper (didn't read and is new keynesian) about ECB and multiple equilibria where one equilibrium is deflation.
ReplyDeletehttp://www.fulcrumasset.com/files/frp201402.pdf?
http://blogs.ft.com/gavyndavies/2014/02/06/the-ecb-must-face-the-deflation-risk/
Thanks for the reference, schina. I've been exposed to the perils issue, but personally don't buy it. I think QE+ forward guidance allow for "negative" rates, and thus the Taylor rule would have a different shape.
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