Contemporary economists argue that negative interest rate as an unconventional monetary policy helps stimulate economic growth. The European Central Bank (ECB) entered Negative Interest Rate Policy (NIRP) territory in June 2014, when it lowered its deposit rates to below zero levels, making it the first major central bank to adopt such policy. In contrast, NIRP can have negative effects on certain economic sectors, such as the property and housing. This paper highlights the effects of negative policy rates on the real estate price inflation inside the Eurozone. The relationship between house price index, negative policy rates, government deficit, unemployment rate, and nominal unit labor cost is addressed and analyzed. Two main hypotheses were adopted i.e., to determine the direct relationship between the Deposit Interest Rate and the House Price Index, and the indirect relationship between the Deposit Interest Rate and the House Price. Furthermore, an econometric model is utilized to sort out the impact of NIRP on the real-estate price inflation in the Eurozone. The outcome of the model shows a strong relationship between negative policy rates and house price index, with government deficit, unemployment rate, and nominal unit labor cost acting as confounding variables.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.