Negative Rates Lose Out to Zero Cost of Money in Opening Wallets

Zero interest rates can be a more effective tool for central banks to get individuals borrowing and making riskier investments than when the cost of money turns negative, according to a new study from a trio of researchers with Israel’s Ben-Gurion University.

Published in the Journal of Behavioral and Experimental Economics, the study is the first such examination of the behavioral impact of negative rates, according to co-author Lior David-Pur, who also heads the debt management unit in Israel’s Ministry of Finance. “Central banks should consider carefully before decreasing rates below zero,” he said in an interview.