Did the BOJ’s negative interest rate policy increase bank lending?

Hiroshi Gunji

The Japanese Economic Review, 2025, vol. 76, issue 1, No 3, 120 pages

Abstract: Abstract This study investigates the effects of the negative interest rate policy in Japan on bank lending using regression discontinuity design. On January 29, 2016, the Bank of Japan announced the beginning of the negative interest rate policy from February 16, 2016. As the financial market did not anticipate this policy, we use the event as a natural experiment. For a few months, starting from February 2016, a negative interest rate was levied on banks that held reserves exceeding the average monthly reserves of 2015. This allows us to employ regression discontinuity design. The results suggest an average treatment effect on the banks levied a negative interest rate of $$-$$ - 1.5% to $$-$$ - 3.5%. In other words, the loans of banks levied negative interest rates declined compared with those of banks that were not.

Keywords: Negative interest rate policy; Regression discontinuity design; Bank of Japan; Bank lending (search for similar items in EconPapers)
JEL-codes: E51 E52 G21 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Did BOJ's Negative Interest Rate Policy Increase Bank Lending? (2018)
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DOI: 10.1007/s42973-023-00150-5

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