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Negative interest rate policy and the yield curve
Author(s) -
Wu Jing Cynthia,
Xia Fan Dora
Publication year - 2020
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2767
Subject(s) - yield curve , interest rate , monetary policy , yield (engineering) , economics , econometrics , term (time) , monetary economics , materials science , metallurgy , physics , quantum mechanics
Summary 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.