Notre Dame economists Cynthia Wu and Eric Sims, who presented to the Fed this summer at the Chicago Fed conference, can comment on Trump's desire to lower interest rates to zero or below zero. Select comments from the press release on their presentation are below and you can access the entire paper here. Notre Dame has an on-campus studio so we can easily arrange radio/TV interviews. Please contact me directly via phone or email or the professors via email at [email protected] & [email protected].
For the purpose of abating issues in the future, Wu and Sims looked more closely at QE and what the effects would be if the Fed pulled out of bond purchasing too quickly during a crisis.
“How the Fed plans to exit QE affects the success of the policy,” Wu said. “They should slowly reduce the balance sheet; if they go too fast, this will result in in worse economic performance.”
Lastly, the professors studied implications for the efficacy of negative interest rate policy of the large balance sheets central banks have accumulated over the course of their QE operations. This is especially relevant for the European Central Bank, which has both accumulated a large balance sheet and still has negative short-term policy rates in place.
“In our model, negative interest rates become less stimulative the larger is the size of a central bank’s balance sheet,” said Sims. “For the ECB, for example, we actually find that pushing rates further into negative territory would be counterproductive.”
Colleen Sharkey
Assistant Director, Media Relations
University of Notre Dame
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