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<p>This study investigates the effectiveness of negative interest rate policy (NIRP) in Sweden from 2010:01 to 2019:04, focusing on its impact on bank lending, market rates, and broader economic activity. The impacts of NIRP are isolated by incorporating a counterfactual scenario in which the policy rate remains at zero using a Factor-Augmented Vector Autoregression (FAVAR) model. The findings indicate that monetary policy continues to successfully transmit under negative rates, primarily through the lending and interest rate channels, while also improving economic activity and trade performance. The influence on inflation was, however, restricted, and we have not seen any substantial evidence of risk-taking behavior that is linked to portfolio rebalancing. The contribution of the paper is the application of a scenario-based approach and a data-rich empirical framework to assess NIRP in a macroeconomic environment.</p>

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Negative interest rate policy and bank lending channel: evidence from the Swedish experience

  • 期刊论文

  • 发表日期：

    2025年6月18日

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  • Onder Ozgur,
  • Erdal Tanas Karagol,
  • Fatih Cemil Ozbugday

摘要

This study investigates the effectiveness of negative interest rate policy (NIRP) in Sweden from 2010:01 to 2019:04, focusing on its impact on bank lending, market rates, and broader economic activity. The impacts of NIRP are isolated by incorporating a counterfactual scenario in which the policy rate remains at zero using a Factor-Augmented Vector Autoregression (FAVAR) model. The findings indicate that monetary policy continues to successfully transmit under negative rates, primarily through the lending and interest rate channels, while also improving economic activity and trade performance. The influence on inflation was, however, restricted, and we have not seen any substantial evidence of risk-taking behavior that is linked to portfolio rebalancing. The contribution of the paper is the application of a scenario-based approach and a data-rich empirical framework to assess NIRP in a macroeconomic environment.