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Negative interest rates as systemic risk event

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  • Kurowski, Łukasz Kamil
  • Rogowicz, Karol

Abstract

The goal of the paper is to assess whether the negative interest rate policy (NIRP) conducted by central banks contributes to higher market stress. To measure the risk level, we follow the methodology proposed by Hollo et al. (2012) and consider major segments of the market. However, as potential NIRP consequences are directly built up in the banks, we extend the original approach by implementing the balance sheet data from that sector. Our results suggest that the level of risk has gradually increased since the introduction of NIRP and primarily concerns the bond market and the banking sector.

Suggested Citation

  • Kurowski, Łukasz Kamil & Rogowicz, Karol, 2017. "Negative interest rates as systemic risk event," Finance Research Letters, Elsevier, vol. 22(C), pages 153-157.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:153-157
    DOI: 10.1016/j.frl.2017.04.001
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    References listed on IDEAS

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    1. Hesna Genay & Rich Podjasek, 2014. "What Is the Impact of a Low Interest Rate Environment on Bank Profitability?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Jul.
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    4. Tim Robinson & Andrew Stone, 2006. "Monetary Policy, Asset-Price Bubbles, and the Zero Lower Bound," NBER Chapters, in: Monetary Policy with Very Low Inflation in the Pacific Rim, pages 43-84, National Bureau of Economic Research, Inc.
    5. Kremer, Manfred & Lo Duca, Marco & Holló, Dániel, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
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    7. Sohn, Bumjean & Park, Heungju, 2016. "Early warning indicators of banking crisis and bank related stock returns," Finance Research Letters, Elsevier, vol. 18(C), pages 193-198.
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    1. Kizito Uyi Ehigiamusoe & Mohamad Shaharudin Samsurijan, 2021. "What matters for finance‐growth nexus? A critical survey of macroeconomic stability, institutions, financial and economic development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5302-5320, October.

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    Keywords

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    JEL classification:

    • 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

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