Empirical evidence of the lending channel of monetary policy under negative interest rates

Boungou, Whelsy

doi:10.1016/j.qref.2021.06.013

Cited by 7 publications

(4 citation statements)

References 24 publications

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“…This result is consistent with the work of Heider et al (2019) and Demiralp, Eisenschmidt, and Vlassopoulos (2019), which suggest that negative interest rates in the euro area favoured an increase in the credit supply of depositdependent banks. Our analysis thus highlights the presence of a monetary policy lending channel under negative interest rates (Boungou, 2020b).…”

Section: Introductionmentioning

confidence: 67%

“…This result underlines bank lending as a plausible channel through which interest rates are transmitted to the real economy. The literature also points to the presence of a lending channel in monetary policy under NIRP (see Basten & Mariathasan, 2018; Bottero et al, 2019; Boungou, 2020b; Schelling & Towbin, 2018). They find that the introduction of negative interest rates has led to an increase in the supply of loans by banks.…”

Section: Empirical Findingsmentioning

confidence: 99%

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Bank lending margins in a negative interest rate environment

Boungou

Mawusi

2021

Int. J Fin Econ

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Following the 2008 Global Financial Crisis, the central banks of many advanced economies resorted to unconventional monetary policies including, the adoption of a negative interest rate policy, aimed at spurring economic recovery and growth. The effectiveness of this policy remains an ongoing debate and largely limited to theoretical assertions. Using a dataset of 9,638 banks from 41 countries over the period 2009-2018, and a Difference-in-Differences estimator, this paper examines whether the adoption of a negative interest rate policy has any effect on bank lending margins. We find that bank margins have contracted in countries where negative rates have been implemented. Our results suggest that, in a negative interest rate environment, the rate on loans declines faster than the rate on retail deposits. Moreover, we show that the effects of negative interest rate policy (NIRP) on bank lending margins were stronger for smaller, less capitalized, deposit-dependent banks. Finally, our findings indicate that banks reliant on retail deposits increased lending in response to NIRP.

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Section: Introductionmentioning

confidence: 67%

Section: Empirical Findingsmentioning

confidence: 99%

Bank lending margins in a negative interest rate environment

Boungou

Mawusi

2021

Int. J Fin Econ

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“…As interest rates move further negative, the lower nominal bound is progressively determined by the wider indirect stress coming from shrinking profitability of banks, since most lending rates decrease more than deposit rates. A recent study by [30] assessed the effects of negative interest rates on banks' risk-taking. The researcher used a panel dataset of 9421 banks from 59 countries over the period 2009-2018 and a Difference-in-Differences estimator.…”

Section: Economic Effect Of Nirpmentioning

confidence: 99%

An Econometric Approach to Assess the Impact of Negative Interest Rate Policy (NIRP) on Real Estate Price Inflation in the Eurozone

Hamdar¹,

Skheita²,

Hamdar³

2022

ECO

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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.

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“…Arce et al (2018), Heider et al (2019), Molyneux et al (2020) provide evidence that banks located in countries that have introduced negative interest rates have no incentive to increase the supply of credit. However, Boungou (2021), Demiralp et al (2021) and Grandi and Guille (2020) find that banks highly dependent on deposits increase their lending activities under NIRP. 3…”

Section: Introductionmentioning

confidence: 96%