Negative Policy Rates, Banking Flows and Exchange Rates

Anwar Khayat ()
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Anwar Khayat: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: Setting negative nominal rates is one of the unconventional policies implemented after the Great Recession to overcome the Zero Lower Bound. Using data from the euro area and Denmark, I assess the impact of introducing a negative interest rate on reserves. I find that it did put a depreciation pressure on the currency due to a reversal in banking flows. This effect is not only caused by policy differentials, but also by a distinct impact of going into negative territory from lowering interest rates.

Keywords: monetary policy; negative nominal rates; exchange rates; banking flows (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-eec and nep-mon
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01203609
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