Fed paper looks at negative rates’ impact on eurozone banks
Effects of policy rate cuts on equity change past the zero lower bound, researchers say
Making policy rates negative lowers banks’ equity prices, particularly for deposit-intensive institutions, a paper published by the Federal Reserve finds.
Miguel Ampudia and Skander Van den Heuvel look at the effects on eurozone banks of the European Central Bank cutting short-term policy rates.
They find that a policy rate cut of 25 basis points in positive territory boosted eurozone banks’ equity prices by 0.97%. In contrast, a decrease in rates by the same amount in negative territory
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