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

Author/Editor:

Margherita Bottero ; Camelia Minoiu ; José-Luis Peydro ; Andrea Polo ; Andrea F Presbitero ; Enrico Sette

Publication Date:

February 28, 2019

Electronic Access:

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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.

Series:

Working Paper No. 19/44

Subject:

English

Publication Date:

February 28, 2019

ISBN/ISSN:

9781498300858/1018-5941

Stock No:

WPIEA2019044

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

59

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