We show that negative interest rate policy (NIRP) has expansionary effects on bank credit supply—and the real economy—through a portfolio rebalancing channel, and that, by shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero lower bound. For identification, we exploit ECB’s NIRP and matched administrative datasets—including the credit register—from Italy, severely hit by the Eurozone crisis. NIRP affects banks with higher exante net short-term interbank positions or, more broadly, more liquid balance-sheets. NIRP affected banks rebalance their portfolios from liquid assets to lending, especially to ex-ante riskier and smaller firms—without higher ex-post delinquencies—and cut loan rates (even to the same firm), inducing sizable firm-level real effects. By contrast, there is no evidence of a retail deposits channel associated with NIRP.

Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy / Polo, Andrea; Luis Peydro, Jose; Presbitero, Andrea; Sette, Enrico; Minoiu, Camelia; Bottero, Margherita. - DP14233:(2019), pp. 1-59.

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

Andrea Polo
;
2019

Abstract

We show that negative interest rate policy (NIRP) has expansionary effects on bank credit supply—and the real economy—through a portfolio rebalancing channel, and that, by shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero lower bound. For identification, we exploit ECB’s NIRP and matched administrative datasets—including the credit register—from Italy, severely hit by the Eurozone crisis. NIRP affects banks with higher exante net short-term interbank positions or, more broadly, more liquid balance-sheets. NIRP affected banks rebalance their portfolios from liquid assets to lending, especially to ex-ante riskier and smaller firms—without higher ex-post delinquencies—and cut loan rates (even to the same firm), inducing sizable firm-level real effects. By contrast, there is no evidence of a retail deposits channel associated with NIRP.
2019
Negative Interest Rates, Portfolio rebalancing, bank lending channel of monetary policy, Liquidity management, eurozone crisis
Expansionary Yet Different: Credit Supply and Real Effects of Negative Interest Rate Policy / Polo, Andrea; Luis Peydro, Jose; Presbitero, Andrea; Sette, Enrico; Minoiu, Camelia; Bottero, Margherita. - DP14233:(2019), pp. 1-59.
File in questo prodotto:
File Dimensione Formato  
CEPR-DP14233.pdf

Solo gestori archivio

Tipologia: Documento in Post-print
Licenza: DRM (Digital rights management) non definiti
Dimensione 1.12 MB
Formato Adobe PDF
1.12 MB Adobe PDF   Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/191237
Citazioni
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
  • OpenAlex ND
social impact