Banks and negative interest rates

Florian Heider, Farzad Saidi and Glenn Schepens

No 2549, Working Paper Series from European Central Bank

Abstract: In this paper, we survey the nascent literature on the transmission of negative policy rates. We discuss the theory of how the transmission depends on bank balance sheets, and how this changes once policy rates become negative. We review the growing evidence that negative policy rates are special because the pass-through to banks’ retail deposit rates is hindered by a zero lower bound. We summarize existing work on the impact of negative rates on banks’ lending and securities portfolios, and the consequences for the real economy. Finally, we discuss the role of different “initial” conditions when the policy rate becomes negative, and potential interactions between negative policy rates and other unconventional monetary policies. JEL Classification: E44, E52, E58, G20, G21

Keywords: bank lending; bank risk taking; deposits; euro-area heterogeneity; negative interest rates; zero lower bound (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-eec, nep-mac and nep-mon
Note: 276127
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Banks and Negative Interest Rates (2021)
Working Paper: Banks and Negative Interest Rates (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212549

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