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Did BOJ's Negative Interest Rate Policy Increase Bank Lending?

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  • GUNJI Hiroshi

Abstract

We investigate the effects of the negative interest rate policy (NIRP) in Japan on bank lending using regression discontinuity design (RDD). On January 29, 2016, the Bank of Japan announced the beginning of the NIRP from February 16, 2016. Since the financial market did not anticipate this policy, we use the event as a natural experiment. For a few months, starting from February 2016, a negative interest rate was levied on banks that held reserves exceeding the average monthly reserves of 2015. This allows us to employ RDD. The results suggest the average treatment effect on the banks to which a negative interest was levied was approximately -1.5% to -3.5%. In other words, the loan rates of banks to which negative interest rates were levied declined compared to those of the banks that were not subject to NIRP.

Suggested Citation

  • GUNJI Hiroshi, 2018. "Did BOJ's Negative Interest Rate Policy Increase Bank Lending?," Discussion papers 18086, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:18086
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    File URL: https://www.rieti.go.jp/jp/publications/dp/18e086.pdf
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    References listed on IDEAS

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    3. Nucera, Federico & Lucas, André & Schaumburg, Julia & Schwaab, Bernd, 2017. "Do negative interest rates make banks less safe?," Economics Letters, Elsevier, vol. 159(C), pages 112-115.
    4. Phil Molyneux & Rue Xie & John Thornton & Alessio Reghezza, 2017. "Did Negative Interest Rates Impact Bank Lending?," Working Papers 17002, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    5. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    6. repec:bla:pacecr:v:23:y:2018:i:1:p:67-79 is not listed on IDEAS
    7. Gauti B. Eggertsson & Ragnar E. Juelsrud & Ella Getz Wold, 2017. "Are Negative Nominal Interest Rates Expansionary?," NBER Working Papers 24039, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Boungou, Whelsy, 2021. "Empirical evidence of the lending channel of monetary policy under negative interest rates," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 309-318.

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