{ "title": "The Evidence Is in on Negative Interest Rate Policies", "publication": "IMF Blog, March 3, 2021", "sourceUrl": "https://www.imf.org/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies", "canonical": "https://www.imf.org/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies", "overlayPath": "/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/index.md", "summary": "These policies have eased financial conditions, and, in the process, likely supported growth and inflation. However, negative rate policies remain politically controversial, partly because they are often misunderstood.", "sections": [ { "heading": "Summary and context", "content": "- Publication author: Gaston Gelos.\n- Date: March 3, 2021.\n- Context: After eight years of experience with negative interest rate policies, evidence suggests these policies have worked to ease financial conditions and likely supported growth and inflation.\n- Since 2012, central banks in Denmark, euro area, Japan, Sweden, and Switzerland adopted negative interest rate policies in response to persistently below-target inflation rates and a very low “neutral real interest rate.”" }, { "heading": "Effects on financial conditions, inflation, and growth", "content": "- Negative interest rate policies have:\n - Eased financial conditions.\n - Likely supported growth and inflation.\n - Stimulated inflation and output by roughly as much as comparable conventional interest rate cuts or other unconventional monetary policies.\n - Been estimated in some studies to be up to 90 percent as effective as conventional monetary policy.\n - Led to lower money-market rates, long-term yields, and bank rates." }, { "heading": "Behavior of banks, markets, and depositors", "content": "- Deposit-rate dynamics:\n - Deposit rates for corporate deposits have dropped more than those on retail deposits because it is costlier for companies than for individuals to switch into cash.\n- Lending and bank behavior:\n - Bank lending volumes have generally increased.\n - Larger banks have increased lending, introduced fees on deposit accounts, and benefited from capital gains.\n - Banks that rely more on deposit funding—as well as smaller and more specialized banks—have suffered more adverse impact on profitability.\n- Cash hoarding and rate limits:\n - Neither banks nor their customers have markedly shifted to cash, suggesting interest rates can probably become even more negative before large-scale cash substitution occurs.\n- Money market funds and risk-taking:\n - Money market funds in adopting countries have not collapsed.\n - The increase in bank risk-taking does not appear to have been excessive.\n - If a “low-for-long” environment causes search for yield or excessive risk taking, negative interest rate policies per se do not appear to have compounded the problem." }, { "heading": "Financial stability and profit effects", "content": "- Any adverse effects on bank profits and financial stability have so far been limited.\n- Caveats:\n - The absence of a significant impact on bank profitability may reflect shorter-term effects that could be reversed over time.\n - Side effects may still arise if policy rates go even more negative or if negative rate policies persist for a very long time." }, { "heading": "Institutional, structural, and political considerations", "content": "- Reasons for limited adoption:\n - Institutional and legal constraints may deter adoption.\n - Financial system structure or interconnection with global markets may make some countries more prone to adverse side effects.\n - Countries with many small banks relying on household deposits may be more reluctant to adopt negative interest rates.\n- Adoption posture:\n - Even adopting central banks have moved tentatively, typically implementing small interest rate cuts because of the risk that negative side effects become more apparent with deeper or prolonged negative rates.\n- Policy implication:\n - Central banks that adopted negative rates may be able to cut them further.\n - Non-adopting central banks should not rule out adding a similar policy to their toolkit—even if they may be unlikely to use it.\n - Ultimately, given the low level of the neutral real interest rate, many central banks may be forced to consider negative interest rate policies sooner or later." }, { "heading": "Research provenance", "content": "- This blog entry is based on work by Luis Brandao-Marques, Marco Casiraghi, Gaston Gelos, Gunes Kamber, and Roland Meeks.\n\nIMF Blog: The Evidence Is in on Negative Interest Rate Policies\n\n---\n\n\n References\n\n- عربي\n- 日本語\n- Português\n- evidence so far\n- does not appear to have been excessive\n\nSource: https://www.imf.org/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/index.md)", "[Structured JSON version](/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/index.json)", "[Bundle manifest](/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/bundle-manifest.json)", "Authors: Gaston Gelos", "Published: March 3, 2021", "Publication author: Gaston Gelos.", "Date: March 3, 2021.", "Context: After eight years of experience with negative interest rate policies, evidence suggests these policies have worked to ease financial conditions and likely supported growth and inflation.", "Since 2012, central banks in Denmark, euro area, Japan, Sweden, and Switzerland adopted negative interest rate policies in response to persistently below-target inflation rates and a very low “neutral real interest rate.”", "Negative interest rate policies have:", "Deposit-rate dynamics:", "Lending and bank behavior:", "Cash hoarding and rate limits:", "Money market funds and risk-taking:", "Any adverse effects on bank profits and financial stability have so far been limited.", "Caveats:", "Reasons for limited adoption:", "Adoption posture:", "Policy implication:", "This blog entry is based on work by Luis Brandao-Marques, Marco Casiraghi, Gaston Gelos, Gunes Kamber, and Roland Meeks.", "[عربي](https://www.imf.org/ar/News/Articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies)", "[日本語](https://www.imf.org/ja/News/Articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies)", "[Português](https://www.imf.org/pt/News/Articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies)", "[evidence so far](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2021/03/01/Negative-Interest-Rates-Taking-Stock-of-the-Experience-So-Far-50115)", "[does not appear to have been excessive](https://www.elibrary.imf.org/view/IMF001/25824-9781498300858/25824-9781498300858/25824-9781498300858_A001.xml?redirect=true)" ], "alternates": { "markdown": "/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/index.md", "json": "/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/index.json", "bundleManifest": "/en/blogs/articles/2021/03/03/blog-the-evidence-is-in-on-negative-interest-rate-policies/bundle-manifest.json" }, "generatedAtUtc": "2026-08-27T16:34:09.757Z" }