NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Negative Interest Rate Policy and the Yield Curve

Jing Cynthia Wu, Fan Dora Xia

NBER Working Paper No. 25180
Issued in October 2018
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth, Monetary Economics

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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Document Object Identifier (DOI): 10.3386/w25180

 
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