EconPapers    
Economics at your fingertips  
 

Monetary Policy and Bank Equity Values in a Time of Low and Negative Interest Rates

Miguel Ampudia and Skander Van den Heuvel (skander.j.vandenheuvel@frb.gov)

Journal of Monetary Economics, 2022, vol. 130, issue C, 49-67

Abstract: Does banks’ exposure to interest rate risk change when interest rates are very low or negative? Using a high-frequency event study methodology and intraday data, we find that the effect of surprise interest rate cuts by the ECB on European bank equity values – an effect that is normally positive – has become negative since interest rates in the euro area reached zero and below. This ‘reversal’ was far more pronounced for banks with a more deposit-intensive funding mix. We argue that these results can be explained by the zero lower bound on interest rates on retail deposits.

Keywords: negative interest rates; monetary policy; bank profitability; reversal rate; ECB (search for similar items in EconPapers)
JEL-codes: E43 E44 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 (20)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393222000733
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Monetary Policy and Bank Equity Values in a Time of Low and Negative Interest Rates (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:130:y:2022:i:c:p:49-67

DOI: 10.1016/j.jmoneco.2022.05.006

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2025-03-19
Handle: RePEc:eee:moneco:v:130:y:2022:i:c:p:49-67