Household Behavior Below the Zero Lower Bound

Asger Lau Andersen, Niels Johannesen, Jens Broendum Petersen, Sonja Settele and Johannes Wohlfart
Additional contact information
Asger Lau Andersen: Department of Economics, University of Copenhagen
Niels Johannesen: Oxford University
Jens Broendum Petersen: Department of Economics, University of Copenhagen
Sonja Settele: University of Cologne, ECONtribute
Johannes Wohlfart: University of Cologne, ECONtribute

No 26-14, CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI)

Abstract: How do households respond when deposit rates drop below zero? Using administrative micro data and exploiting cross-bank variation in interest rate policies, we study a major episode of negative deposit rates in Denmark affecting two thirds of household deposits. We find that households strongly reduced deposit balances when exposed to negative deposit rates, allocating funds to stock portfolios and consumption. In a large-scale survey, we document important roles for loss aversion, perceived unfairness, intertemporal substitution and return considerations in driving these responses. Our findings suggest that monetary policy can have strong consumption effects in negative territory.

Keywords: Unemployment; insurance; selection (search for similar items in EconPapers)
JEL-codes: D14 D83 D84 D91 E21 E43 E52 E71 (search for similar items in EconPapers)
Pages: 95
Date: 2026-07-14
New Economics Papers: this item is included in nep-mac
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