scholarly journals Negative Interest Rates, Excess Liquidity and Retail Deposits: Banks’ Reaction to Unconventional Monetary Policy in the Euro Area

2019 ◽  
Author(s):  
Selva Demiralp ◽  
Jens Eisenschmidt ◽  
Thomas Vlassopoulos
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Euro Area ◽  
Unconventional Monetary Policy ◽  
Negative Interest Rates ◽  
Excess Liquidity

scholarly journals Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

2018 ◽  
Vol 32 (4) ◽  
pp. 147-172 ◽  
Author(s):  
Giovanni Dell’Ariccia ◽  
Pau Rabanal ◽  
Damiano Sandri
Keyword(s):  
Monetary Policy ◽  
United Kingdom ◽  
Interest Rates ◽  
Euro Area ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Unconventional Monetary Policy ◽  
Monetary Policies ◽  
The United Kingdom

The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan. In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound. In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks’ balance sheets expanded to unprecedented levels. This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan. The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.

scholarly journals Unconventional Monetary Policy, Fiscal Side Effects, and Euro Area (Im)balances

2019 ◽  
Vol 18 (1) ◽  
pp. 202-231 ◽  
Author(s):  
Michael Hachula ◽  
Michele Piffer ◽  
Malte Rieth
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Euro Area ◽  
Public Expenditures ◽  
Inflation Expectations ◽  
Unconventional Monetary Policy ◽  
Vector Autoregressions ◽  
Public And Private ◽  
Consumer Prices ◽  
The Common

Abstract We study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions, identified with external instruments. The instruments are based on the common unexpected variation in euro area sovereign yields for different maturities on policy announcement days. We first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity, consumer prices, and inflation expectations. We then document that the shocks lead to a rise in primary public expenditures and a widening of internal trade balances.

scholarly journals Unconventional Monetary Policy

2021 ◽  
pp. 53-65
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Monetary Policy ◽  
Side Effects ◽  
Interest Rates ◽  
Foreign Currency ◽  
Unconventional Monetary Policy ◽  
Lender Of Last Resort ◽  
Fixed Rate ◽  
Negative Interest Rates

AbstractThis chapter introduces the reader to unconventional monetary policy, i.e. monetary policy using instruments going beyond the steering of short-term interest rates as described in the previous chapter. We start by providing the rationale of unconventional monetary policy, i.e. essentially pursuing an effective monetary policy when conventional policies are not able to provide the necessary monetary accommodation because of the zero lower bound. We then discuss negative interest rate policies, and explain why rates slightly below zero have proven to be feasible despite the existence of banknotes. We also discuss possible unintended side-effects of negative interest rates. We continue with a discussion of non-conventional credit operations: lengthening of their duration, the use of fixed-rate full allotment, the widening of the access of counterparties to the central bank’s credit operation, targeted operations, credit in foreign currency, and widening the collateral set. Finally, we turn to the purposes and effects of securities purchase programmes. We end the chapter by revisiting the classification of central bank instruments in three categories: conventional, unconventional, and lender of last resort.

Unconventional monetary policy and negative interest rates: a Post-Keynesian perspective on the liquidity trap and euthanasia of the rentier

2019 ◽  
Vol 7 (2) ◽  
pp. 185-200
Author(s):  
Olivia Bullio Mattos ◽  
Felipe Da Roz ◽  
Fernanda Oliveira Ultremare ◽  
Guilherme Santos Mello
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Full Employment ◽  
Capital Gains ◽  
Unconventional Monetary Policy ◽  
Short Term ◽  
Main Hypothesis ◽  
Liquidity Trap ◽  
Negative Interest Rates

This article discusses ‘unconventional’ monetary policy after the 2008 crisis. The focus is the original theoretical basis for such policy and possible Keynesian readings and criticisms. Drawing inspiration mainly from Keynes (1930; 1936) and Minsky (1975), the paper seeks to explain why ultra-low/negative interest rates neither caused ‘rentiers’ to die, nor achieved full employment. The main hypothesis goes in the direction pointed to by Keynes: the problem is the low marginal efficiency of capital, the liquidity trap, and the lack of active government fiscal policy, which should be used in conjunction with monetary policy that maintains low long-term interest rates in order to spur investment. Monetary policy and very low/negative interest rates seem insufficient to overcome low growth. They are also incapable, at least in the short term, of promoting euthanasia of the rentiers as current monetary policy allows financial institutions to benefit from the capital gains it spurs.

scholarly journals UNCONVENTIONAL MONETARY POLICY, COMPETITION AND FINANCIAL STABILITY. EVIDENCE FROM THE EUROZONE BANKS

2020 ◽  
Vol 38 (1) ◽  
Author(s):  
Ane Bakaikoa Pedrosa ◽  
José Manuel Mansilla Fernández
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Unconventional Monetary Policy ◽  
Banking Competition ◽  
Negative Interest Rates ◽  
Core Country ◽  
Policy Competition

This article analyses the effects of the ECB’s negative interest rates (or unconventional) policy on the degree of banking competition, lending and deposit supply, and financial stability. Using a dataset comprising 191 Eurozone banks for the 2002Q1-2016Q4 period, our results suggest that negative interest rates (i) increase banks’ lending and deposit supply, (ii) reduce banking competition, and (iii) weaken financial stability. This phenomenon is economically more significant for periphery country banks than for core country banks.

scholarly journals Does Unconventional Monetary Policy Affect Bank Profitability in the Euro Area?

2020 ◽  
Vol 12 (1) ◽  
pp. 9
Author(s):  
Paolo Agnese ◽  
Paolo Capuano
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Euro Area ◽  
Unconventional Monetary Policy ◽  
Bank Profitability ◽  
Net Interest Margin ◽  
Policy Measures ◽  
The Impact ◽  
The Relationship ◽  
Interest Margin

This paper investigates the impact of unconventional monetary policy (UMP) on bank profitability in the euro area, over the period 2007-2019.In particular, through multiple regression models, we analyze the relationship between the UMP variables (Longer-term refinancing operations and Securities held for monetary policy purposes) and the main bank profitability variables used in the literature (Return on average equity, Return on average assets and Net interest margin).This work is original compared to recent studies on the subject as it considers the impact of UMP expressed in terms of volumes rather than in terms of interest rates on bank profitability variables.Our results suggest that the UMP adopted by the Eurosystem over the period considered is negatively associated with bank profitability expressed by the Return on average equity and the Return on average asset. By contrast, monetary policy measures do not seem to have had any effect on the Net interest margin. 

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