The effectiveness of a negative interest rate policy

Marco Onofri, Gert Peersman () and Frank Smets

Journal of Monetary Economics, 2023, vol. 140, issue C, 16-33

Abstract: In a dynamic stochastic general equilibrium model that is calibrated for the euro area, a negative interest rate policy (NIRP) can have contractionary effects on the economy when interest rates on household deposits reach the zero lower bound, and such deposits are the only source of bank funding and household savings. However, by introducing additional assets to households’ portfolios and alternative sources of bank funding, such as bank bonds, the NIRP becomes expansionary. Because both features characterize the euro area well, they are essential to study the effectiveness of NIRP policies.

Keywords: Negative interest rate policy; Zero lower bound; Monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E50 E52 E58 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The Effectiveness of a Negative Interest Rate Policy (2021)
Working Paper: THE EFFECTIVENESS OF A NEGATIVE INTEREST RATE POLICY (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:140:y:2023:i:c:p:16-33

DOI: 10.1016/j.jmoneco.2023.07.002

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