Empirical Evidence of the Lending Channel of Monetary Policy under Negative Interest Rates
BOUNGOU, Whelsy
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
BOUNGOU, Whelsy
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
< Reduce
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]
Language
EN
Article de revue
This item was published in
Quarterly Review of Economics and Finance. 2020-01-01, vol. 81, p. 309-318
English Abstract
Does the lending channel of monetary policy operate under a negative interest rate policy (NIRP)? The
purpose of this study is to shed light on the existence of a lending channel of monetary policy under NIRP.
To do so, ...Read more >
Does the lending channel of monetary policy operate under a negative interest rate policy (NIRP)? The
purpose of this study is to shed light on the existence of a lending channel of monetary policy under NIRP.
To do so, we aim to provide an in-depth analysis of the relationship between NIRP and bank-lending
behavior. To achieve this, we employ a large panel dataset of 4072 banks operating in 54 countries
over the period 2009–2018 and a Difference-in-Differences methodology. We find that banks located
in countries affected by negative interest rates have adjusted their bank-lending behavior by increasing
lending activities. Our findings suggest that in response to negative interest rates, banks have reduced
their lending cost, and increased lending supply, particularly loans with maturities ranging from 3 to
12 months and those over 5 years. Finally, we also find that the transmission of monetary policy under
negative interest rates to the real economy depends on banks’ specific characteristics such as reliance on
retail deposits and size.Read less <
English Keywords
Negative interest rates
Lending cost
Lending supply
Lending maturity
Difference-in-Differences estimation