1. Expansionary yet different: credit supply and real effects of negative interest rate policy
- Author
-
Margherita Bottero, Camelia Minoiu, José-Luis Peydró, Andrea Polo, Andrea F. Presbitero, and Enrico Sette
- Subjects
BANKS ,Economics and Econometrics ,eurozone crisis ,Firm -level real effects ,MONETARY-POLICY ,Economics ,TRANSMISSION ,Strategy and Management ,SAY ,Social Sciences ,TIMES ,RISK-TAKING ,Monetary policy ,EURO-AREA ,Accounting ,Business & Economics ,0502 economics and business ,bank lending channel of monetary policy ,1402 Applied Economics ,Negative nominal interest rates ,Firm-level real effects ,Portfolio rebalancing ,Liquidity management ,040101 forestry ,CRUNCH ,050208 finance ,05 social sciences ,1. No poverty ,Negative Interest Rates, Portfolio rebalancing, bank lending channel of monetary policy, Liquidity management, eurozone crisis ,1502 Banking, Finance and Investment ,04 agricultural and veterinary sciences ,LIQUIDITY ,Business, Finance ,Negative Interest Rates ,1606 Political Science ,8. Economic growth ,0401 agriculture, forestry, and fisheries ,Finance - Abstract
Supplemental material file: online appendix We show that negative interest rate policy (NIRP) has expansionary effects on credit supply through a portfolio rebalancing channel. By shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero-lower-bound and has effects similar to QE. For identification, we exploit ECB’s NIRP and the Italian credit register and, for external validity, European and U.S. datasets. NIRP affects more banks with higher ex-ante liquid assets, including net interbank positions. More exposed banks reduce liquid assets, expand credit supply, especially to financially-constrained firms, and cut loan rates, inducing firms to increase investment and the wage bill. This project received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement No 648398). Peydró also acknowledges financial support from the ECO2015-68182-P (MINECO/FEDER, UE) grant and the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563).
- Published
- 2022