Debating the Usefulness of Negative Interest Rates

The video discusses the concept of negative nominal interest rates and how central banks can implement them to manage economic downturns. It explains the mechanism of creating excess reserves and the impact on interbank rates. The challenges faced by banks and depositors, such as financial repression and cash holding, are also addressed. Potential solutions like flexible exchange rates are proposed to mitigate these challenges.

Why might depositors choose to hold cash instead of keeping their money in banks during a period of negative interest rates?

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What historical data is provided regarding short-term nominal rates during past recessions in the US?

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What suggestion is made regarding the deposit price of currency in relation to negative interest rates?

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