Negative interest rate policy and the yield curve

Jing Cynthia Wu and Fan Dora Xia

Journal of Applied Econometrics, 2020, vol. 35, issue 6, 653-672

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 that 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. By contrast, for the last two dates, forward guidance drives the largest effects in two years.

Date: 2020
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https://doi.org/10.1002/jae.2767

Related works:
Working Paper: The negative interest rate policy and the yield curve (2018)
Working Paper: Negative Interest Rate Policy and the Yield Curve (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:35:y:2020:i:6:p:653-672

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