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Negative Policy Rates, Banking Flows and Exchange Rates

Anwar Khayat ()
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Anwar Khayat: Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, http://www.amse-aixmarseille.fr/en/users/khayat#profile-membres

No 1538, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Setting negative nominal rates is one of the unconventional policies implemented after the Great Recession to overcome the Zero Lower Bound. Using data from the euro area and Denmark, I assess the impact of introducing a negative interest rate on reserves. I find that it did put a depreciation pressure on the currency due to a reversal in banking flows. This effect is not only caused by policy differentials, but also by a distinct impact of going into negative territory from lowering interest rates.

Keywords: Monetary policy; negative nominal rates; exchange rates; banking flows (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
Date: 2015-09, Revised 2015-09
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