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“Negative-for-long” interest rates and customer deposit rate

Author

Listed:
  • Whelsy Boungou

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

Abstract

Using Difference-in-Differences method and data from 5115 banks located in 74 countries over 2009-2018, we investigate the effects of a negative interest rate policy (NIRP) on banks' customer deposit rate. Our results highlight that in response to the introduction of NIRP, banks reduced their customer deposit rate. We also show that this effect varies from country to country, espe- cially among eurozone countries. Finally, we find that the reduction in customer deposit rate is not immediate and that it becomes stronger as NIRP persists over time. Overall, our findings confirm that banks are reluctant to reduce customer deposit rate. However, this reluctance de- creases as negative interest rates are prolonged over time.

Suggested Citation

  • Whelsy Boungou, 2022. "“Negative-for-long” interest rates and customer deposit rate," Post-Print hal-03676144, HAL.
    • Handle: RePEc:hal:journl:hal-03676144
    DOI: 10.1016/j.frl.2021.102298
    as

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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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