Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy

Margherita Bottero, Camelia Minoiu, Jose-Luis Peydro, Andrea Polo, Andrea Presbitero and Enrico Sette

No 1090, Working Papers from Barcelona School of Economics

Abstract: We show that negative interest rate policy (NIRP) has expansionary effects on bank credit supply and firm outcomes through a portfolio rebalancing channel. For identification, we exploit ECB’s NIRP and credit register, firm- and bank-level datasets. NIRP affects relatively more banks with higher ex-ante net interbank positions or more liquid balance sheets. More exposed banks reduce liquid assets, expand credit supply to ex-ante riskier firms, and cut rates, inducing sizable firm-level real effects. By shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero-lower-bound. We find no evidence of a contractionary retail deposit channel.

Keywords: negative interest rates; portfolio rebalancing; bank lending channel of monetary policy; liquidity management; Eurozone crisis (search for similar items in EconPapers)
JEL-codes: E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Expansionary yet different: Credit supply and real effects of negative interest rate policy (2022)
Working Paper: Expansionary yet different: credit supply and real effects of negative interest rate policy (2020)
Working Paper: Expansionary yet different: credit supply and real effects of negative interest rate policy (2020)
Working Paper: Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy (2020)
Working Paper: Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy (2019)
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