The ‘effective lower bound' on central bank interest rates could be removed by the abolition of currency or, more practically, by removing the fixed exchange rate between cash and central bank reserves, according to a former member of the Bank of England's Monetary Policy Committee (MPC).
Willem Buiter, who sat on the MPC between 1997 and 2000 and is now Citigroup chief economist, made the suggestion in a research note published today alongside his Citigroup colleague Ebrahim Rahbari.
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