Household Behavior Below the Zero Lower Bound

Asger Lau Andersen, Niels Johannesen, Jens Brøndum Petersen, Sonja Settele and Johannes Wohlfart

No 12732, CESifo Working Paper Series from CESifo

Abstract: How do households respond when deposit rates drop below zero? Using administrative micro data and exploiting cross-bank variation in interest rate policies, we study a major episode of negative deposit rates in Denmark affecting two thirds of household deposits. We find that households strongly reduced deposit balances when exposed to negative deposit rates, allocating funds to stock portfolios and consumption. In a large-scale survey, we document important roles for loss aversion, perceived unfairness, intertemporal substitution and return considerations in driving these responses. Our findings suggest that monetary policy can have strong consumption effects in negative territory.

Keywords: negative interest rates; households; consumption; monetary policy (search for similar items in EconPapers)
JEL-codes: D14 D83 D84 D91 E21 E43 E52 E71 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12732

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