Creating an exchange rate between paper currency and bank reserves is the “best approach” for enabling negative interest rates, a paper published by the International Monetary Fund argues.

In the publication, Ruchir Agarwal and Miles Kimball provide a guide for implementing a set of tools that would enable central banks to use deep negative rates to fight a recession. They recommend creating an exchange rate in the central bank cash window – what they call “the clean approach”.

For instance