Working Paper: CEPR ID: DP16016
Authors: Luis Brando Marques; Marco Casiraghi; Gaston Gelos; Gunes Kamber; Roland Meeks
Abstract: This paper surveys studies on the impact of central bank negative interest rate policies (NIRP). It reviews recent research on the effects of NIRP on financial markets, banks, households, firms, and the macroeconomy. Overall, policy rate cuts when interest rates are negative propagate along the yield curve, with the first policy cut below zero contributing significantly to the fall in longer-term yields. Lending and deposit rates also decrease following the adoption of NIRP. Based on the experience so far, bank lending volumes have risen, and bank profits have not significantly deteriorated, although there is considerable heterogeneity in the effects. The impact of NIRP on inflation and output appears to be comparable to that of conventional interest rate cuts.
Keywords: negative interest rates; monetary policy; bank lending; bank profitability; nonbank financial institutions
JEL Codes: E43; E52; G21; G22; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| NIRP (E43) | decreased lending and deposit rates (G21) |
| NIRP (E43) | bank lending volumes (G21) |
| NIRP (E43) | inflation (E31) |
| NIRP (E43) | output (C67) |
| NIRP (E43) | macroeconomic outcomes (E66) |
| NIRP (E43) | term structure of yields (E43) |
| NIRP (E43) | profitability of banks (G21) |
| profitability of banks (G21) | lending behavior (G21) |