From LSE economist (and former central banker) Willem Buiter
, who concludes
Removing the zero lower bound on nominal interest rates would represent a valuable addition to the policy arsenal of the central banks. We know something about how interest rates work. There is no reason to believe there would be any dramatic change in the effectiveness of policy rate cuts if these cuts to the rate [are to a] level below zero. We know next to nothing about the effectiveness of the alternative policies that central banks are forced to adopt if they don’t just want to sit on their hand[s] once the[y] hit the zero lower bound: quantitative easing and credit easing, relaxing the collateral requirements for central bank lending etc.
I should note that, economic logic aside, the "optics" of negative interest rates are not very good. I received more hate mail from my NY Times article
on the topic than from anything else I have ever written. Indeed, Harvard University President Drew Faust received several emails suggesting that I be fired for writing the piece. She graciously copied me on her replies, which noted that Harvard faculty are not sacked for espousing controversial ideas. Central bankers, however, do not enjoy the same luxury.