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Negative Policy Rates, Banking Flows and Exchange Rates

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  • Anwar Khayat

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Setting negative nominal rates is one of the unconventional policies implemented after the Great Recession to overcome the Zero Lower Bound. Using data from the euro area and Denmark, I assess the impact of introducing a negative interest rate on reserves. I find that it did put a depreciation pressure on the currency due to a reversal in banking flows. This effect is not only caused by policy differentials, but also by a distinct impact of going into negative territory from lowering interest rates.

Suggested Citation

  • Anwar Khayat, 2015. "Negative Policy Rates, Banking Flows and Exchange Rates," Working Papers halshs-01203609, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01203609
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01203609
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    References listed on IDEAS

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    Cited by:

    1. Bank for International Settlements, 2019. "Unconventional monetary policy tools: a cross-country analysis," CGFS Papers, Bank for International Settlements, number 63, december.
    2. Jens Eisenschmidt & Frank Smets, 2019. "Negative Interest Rates: Lessons from the Euro Area," Central Banking, Analysis, and Economic Policies Book Series, in: Álvaro Aguirre & Markus Brunnermeier & Diego Saravia (ed.),Monetary Policy and Financial Stability: Transmission Mechanisms and Policy Implications, edition 1, volume 26, chapter 2, pages 013-042, Central Bank of Chile.

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    Keywords

    monetary policy; negative nominal rates; exchange rates; banking flows;
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