Banks and Negative Interest Rates

Florian Heider, Farzad Saidi and Glenn Schepens
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Farzad Saidi: Centre for Economic Policy Research, London EC1V 0DX, United Kingdom

Annual Review of Financial Economics, 2021, vol. 13, issue 1, 201-218

Abstract: In this article, we review 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 research on the impact of negative rates on banks' lending and securities portfolios as well as their 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: 2021
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Citations: View citations in EconPapers (15)

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https://doi.org/10.1146/annurev-financial-111320-102646
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Related works:
Working Paper: Banks and negative interest rates (2021)
Working Paper: Banks and Negative Interest Rates (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:anr:refeco:v:13:y:2021:p:201-218

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DOI: 10.1146/annurev-financial-111320-102646

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