Negative Interest Rate Policy and the Yield Curve / Jing Cynthia Wu, Fan Dora Xia.

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Wu, Jing Cynthia

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w25180.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We evaluate the implications of the ECB's negative interest rate policy (NIRP) on the yield curve. To capture various shapes of the short end of the yield curve induced by the NIRP, we introduce two policy indicators, which summarize the immediate and longer-horizon future monetary policy stances. We find the four NIRP events lowered the short term interest rate by the same amount. The impact is dampened at longer maturities for the first two event dates due to lack of forward guidance. In contrast, in the last two dates, forward guidance drives the largest effects in two years.

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October 2018.

We evaluate the implications of the ECB's negative interest rate policy (NIRP) on the yield curve. To capture various shapes of the short end of the yield curve induced by the NIRP, we introduce two policy indicators, which summarize the immediate and longer-horizon future monetary policy stances. We find the four NIRP events lowered the short term interest rate by the same amount. The impact is dampened at longer maturities for the first two event dates due to lack of forward guidance. In contrast, in the last two dates, forward guidance drives the largest effects in two years.