Implications of negative interest rate policies: An early assessment

Over the past few years, several central banks have implemented negative interest rate policies (NIRP) to provide additional monetary policy stimulus. This paper presents an early assessment of the domestic and global implications of NIRP by analysing the behaviour of a set of key financial variables. We report three main results. First, since the introduction of NIRP, many of the key financial variables have evolved broadly, as implied by the standard transmission channels. For the euro area, the responses of these financial variables following NIRP announcements are directionally consistent with those of conventional interest rate cuts. Second, NIRP could pose risks to financial stability but there is no conclusive evidence as yet of a significant impact on bank profitability or of a broad-based increase in leverage. Third, the responses of assets of emerging market and developing economies to NIRP announcements are on average broadly consistent with those to other types of expansionary monetary policy measures.