RE: Re: RE: Re: P.S.

["Devine, James" <jdevine@xxxxxxx>]

 so negative nominal interest rates can exist, as a way to make up to
borrowers for the fact that deflation makes _real_ interest rates high.

if prices are going down 10% per year
and the nominal rate is -3%
then the real interest is 7%
JD

-----Original Message-----
From: Sabri Oncu
To: PEN-L
Sent: 5/11/2002 1:31 PM
>Subject: [PEN-L:25893] Re: RE: Re: P.S.

http://www.jei.org/Archive/JEIR98/9843w2.html

Jim and Micheal,

Take a look at the above as an example. A google search with:

   Japan "negative interest rate"

brings a ton of information. I know it because of my favorite
inetrest rate model: the Vasicek model. Oldrick (Vasicek) is a
friend and this is mainly why I like it so much. Well, just
kidding, this is of course the secondary reason: it is an easy
model to implement, this is the real reason. People did not like
his model because it implied that interest rates can go negative.
When Japanese rates went negative, people started to like his
model again.

Best,

Sabri