Working Paper: NBER ID: w25180
Authors: Jing Cynthia Wu; Fan Dora Xia
Abstract: We evaluate the implications of the ECB's negative interest rate policy (NIRP) on the yield curve. To capture various shapes of the short end of the yield curve induced by the NIRP, we introduce two policy indicators, which summarize the immediate and longer-horizon future monetary policy stances. We find the four NIRP events lowered the short term interest rate by the same amount. The impact is dampened at longer maturities for the first two event dates due to lack of forward guidance. In contrast, in the last two dates, forward guidance drives the largest effects in two years.
Keywords: No keywords provided
JEL Codes: E43; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| NIRP events (E43) | short-term interest rates (E43) |
| NIRP events (E43) | longer maturities interest rates (E43) |
| forward guidance (E60) | short-term interest rates (E43) |
| NIRP (E43) | yield curve shapes (E43) |
| NIRP (E43) | risk premium (G19) |
| rate cut (E43) | expansionary monetary policy (E52) |
| March 2016 cut (Y60) | risk-neutral expectations (D84) |