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Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data

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Listed:
  • Margherita Bottero
  • Camelia Minoiu
  • José-Luis Peydró
  • Andrea Polo
  • Andrea F. Presbitero
  • Enrico Sette

Abstract

We study negative interest rate policy (NIRP) exploiting ECB’s NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply—and hence the real economy—through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Suggested Citation

  • Margherita Bottero & Camelia Minoiu & José-Luis Peydró & Andrea Polo & Andrea F. Presbitero & Enrico Sette, 2019. "Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data," Working Papers 1090, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:1090
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    References listed on IDEAS

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    Cited by:

    1. Altavilla, Carlo & Burlon, Lorenzo & Giannetti, Mariassunta & Holton, Sarah, 2019. "Is there a zero lower bound? The effects of negative policy rates on banks and firms," Working Paper Series 2289, European Central Bank.

    More about this item

    Keywords

    negative interest rates; portfolio rebalancing; bank lending channel of monetary policy; liquidity management; Eurozone crisis;

    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
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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