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What if they had not Gone Negative? A Counterfactual Assessment of the Impact from Negative Interest Rates

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  • Nektarios A. Michail

Abstract

The counterfactual estimation technique of Pesaran and Smith () is employed to provide an assessment of the impact stemming from the implementation of negative interest rates in three European economies (Denmark, Sweden and Switzerland). The analysis indicates that negative interest rates did not have a significant effect on bank lending growth or inflation in any country. This failure to reject the policy ineffectiveness hypothesis most likely lies in the fact that negative interest rates did not ease the situation for the factors restricting the supply of bank lending, namely bank funding costs and Return‐on‐Equity.

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  • Nektarios A. Michail, 2019. "What if they had not Gone Negative? A Counterfactual Assessment of the Impact from Negative Interest Rates," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(1), pages 1-19, February.
    • Handle: RePEc:bla:obuest:v:81:y:2019:i:1:p:1-19
    DOI: 10.1111/obes.12251
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    Cited by:

    1. Durrani, Agha & Metzler, Julian & Michail, Nektarios & Werner, Johannes Gabriel, 2022. "Bank lending rates and the remuneration for risk: evidence from portfolio and loan level data," Working Paper Series 2753, European Central Bank.
    2. Czudaj, Robert L., 2020. "Is the negative interest rate policy effective?," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 75-86.
    3. Nektarios Michail & Agorasti Patronidou & Ioanna Evangelou, 2021. "Does Household Behaviour Depend on Monetary Policy? Evidence from Cyprus," Working Papers 2021-01, Central Bank of Cyprus.
    4. Joscha Beckmann & Klaus-Jürgen Gern & Nils Jannsen, 2022. "Should they stay or should they go? Negative interest rate policies under review," International Economics and Economic Policy, Springer, vol. 19(4), pages 885-912, October.
    5. Nektarios A. Michail & Christos S. Savva & Demetris Koursaros, 2021. "Are central banks to blame? Monetary policy and bank lending behavior," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 762-779, October.
    6. Satyam Kumar & Yelleti Vivek & Vadlamani Ravi & Indranil Bose, 2023. "Causal Inference for Banking Finance and Insurance A Survey," Papers 2307.16427, arXiv.org.
    7. repec:tcb:cebare:v:24:y:2024:i:1:p:1-24 is not listed on IDEAS
    8. Gerhard Rösl & Franz Seitz & Karl-Heinz Tödter, 2019. "The Cost of Overcoming the Zero Lower-Bound: A Welfare Analysis," Economies, MDPI, vol. 7(3), pages 1-18, July.

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