Banks and Negative Interest Rates

Farzad Saidi, Florian Heider and Glenn Schepens

No 15611, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper, we survey the nascent literature on the transmission of negative policy rates. We discuss the theory of how the transmission depends on bank balance sheets, and how this changes once policy rates become negative. We review the growing evidence that negative policy rates are special because the pass-through to banks' retail deposit rates is hindered by a zero lower bound. We summarize existing work on the impact of negative rates on banks' lending and securities portfolios, and the consequences for the real economy. Finally, we discuss the role of different "initial" conditions when the policy rate becomes negative, and potential interactions between negative policy rates and other unconventional monetary policies.

Keywords: Deposits; Negative interest rates; Zero lower bound; Bank lending; Bank risk taking; Euro-area heterogeneity (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G20 G21 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Banks and Negative Interest Rates (2021)
Working Paper: Banks and negative interest rates (2021)
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