Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data

By Margherita Bottero, Camelia Minoiu, José-Luis Peydró, Andrea Polo, Andrea F Presbitero, Enrico Sette

February 28, 2019

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Margherita Bottero, Camelia Minoiu, José-Luis Peydró, Andrea Polo, Andrea F Presbitero, and Enrico Sette. Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data, (USA: International Monetary Fund, 2019) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Subject: Bank credit, Bank deposits, Banking, Central bank policy rate, Credit, Financial institutions, Financial services, Loans, Money

Keywords: Bank asset allocation, Bank characteristic, Bank control variables, Bank credit, Bank deposits, Bank lending channel, Bank-issued securities, Central bank policy rate, Credit, Credit supply, Eurozone crisis, Exposure variable, Liquidity management, Loan growth, Loans, Negative interest rates, Net interbank position, NIRP announcement, NIRP period, NIRP-affected bank, Policy rate, Portfolio rebalancing, Risk-reward calculus, Total assets, WP, Yield curve

Publication Details

Pages:

59
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/044
Stock No:

WPIEA2019044
ISBN:

9781498300858
ISSN:

1018-5941

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