Is there a zero lower bound? The effects of negative policy rates on banks and firms

Carlo Altavilla, Lorenzo Burlon, Mariassunta Giannetti and Sarah Holton

Journal of Financial Economics, 2022, vol. 144, issue 3, 885-907

Abstract: Exploiting confidential data from the euro area, we show that sound banks pass negative rates on to their corporate depositors and that pass-through is not impaired when policy rates move into negative territory. We do not observe a contraction in deposits, reflecting a general increase in corporate liquidity during the sample period. When their banks charge negative rates on deposits, firms with ex ante high liquidity invest more than comparable firms that are not charged negative rates and increase their liquid holdings less. These results challenge the common view that conventional monetary policy becomes ineffective at the zero lower bound.

Keywords: Monetary policy; Negative rates; Corporate deposits; Cash; Investment; Precautionary behavior (search for similar items in EconPapers)
JEL-codes: D22 D25 E43 E52 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Is There a Zero Lower Bound? The Effects of Negative Policy Rates on Banks and Firms (2019)
Working Paper: Is there a zero lower bound? The effects of negative policy rates on banks and firms (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:3:p:885-907

DOI: 10.1016/j.jfineco.2021.06.032

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