As solutions to zero bound constraint, other prescriptions (i) raising inflation targets by central banks (Blanchard et al., 2010) and (ii) making negative nominal interest rates a possibility (Mankiw, 2010) have been questioned on various grounds.
We analysed how the simultaneous occurrence of various macroeconomic shocks over the next three years might affect the German banking system. To this end, we assumed a sudden rise in short-term interest rates and a sharp fall in stock prices, the real economy and real estate prices: all things considered, an exceedingly severe scenario.