Expansionary yet different: Credit supply and real effects of negative interest rate policy

Margherita Bottero, Camelia Minoiu, Jose-Luis Peydro, Andrea Polo, Andrea Presbitero and Enrico Sette

Journal of Financial Economics, 2022, vol. 146, issue 2, 754-778

Abstract: We show that negative interest rate policy (NIRP) has expansionary effects on credit supply through a portfolio rebalancing channel. By shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero-lower-bound and has effects similar to QE. For identification, we exploit ECB’s NIRP and the Italian credit register and, for external validity, European and U.S. datasets. NIRP affects more banks with higher ex-ante liquid assets, including net interbank positions. More exposed banks reduce liquid assets, expand credit supply, especially to financially-constrained firms, and cut loan rates, inducing firms to increase investment and the wage bill.

Keywords: Negative nominal interest rates; Firm-level real effects; Portfolio rebalancing; Liquidity management; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 E58 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 (11)

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Related works:
Working Paper: Expansionary yet different: credit supply and real effects of negative interest rate policy (2020)
Working Paper: Expansionary yet different: credit supply and real effects of negative interest rate policy (2020)
Working Paper: Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy (2020)
Working Paper: Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy (2019)
Working Paper: Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:146:y:2022:i:2:p:754-778

DOI: 10.1016/j.jfineco.2021.11.004

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