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One size fits all? Effects of the zero lower bound on bank lending across countries

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  • Lauritzen, Jacob Bratshaug

Abstract

This paper documents significant cross-country heterogeneity in the effects of negative policy rates on bank lending. When policy rates go negative, high-deposit banks decrease loan extension relative to low-deposit ones, but only in countries where deposit rates were already close to the zero lower bound before the introduction of negative policy rates. In countries where deposit rates were higher, no contractionary effect is found. Previous studies, which treat all euro area countries as one entity, are likely to underestimate the true effect of negative rates on bank lending.

Suggested Citation

  • Lauritzen, Jacob Bratshaug, 2022. "One size fits all? Effects of the zero lower bound on bank lending across countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:intfin:v:81:y:2022:i:c:s1042443122001445
    DOI: 10.1016/j.intfin.2022.101672
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    More about this item

    Keywords

    Bank lending; Interest rates; Lower bound; Negative rates;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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