An Alternative Instrument Negative Interest for Economic Growth: An ARDL Analysis Approach

Abstract

In this study negative interest rates that is denoted as an alternative monetary policy instrument in especially developed countries, are inquired to have a relation with economic growth on selected fragile countries using ARDL analysis for the period 1995-2016. The aim of the study is to discuss the applicability of negative interest policy for the high fragile countries including Turkey by analyzing the direction of the effect of negative interest on economic growth. On the other hand, the possible effects of negative interest rate policies on current account deficit beside savings and investments are assessed. In this context statistically significant and positive relation between economic growth and interest rates below zero is found in the developed countries that use negative interest as monetary policy. Moreover, there is also same relation in emerging fragile countries. However, there is difference to obtain the long run equilibrium. While this period is short for the developed countries, it is relatively long for the emerging fragile countries.