Monetary Policy Transmission to Mortgages in a Negative Interest Rate Environment

47 Pages Posted: 19 Feb 2019

See all articles by Adrien Amzallag

Adrien Amzallag

European Central Bank (ECB)

Alessandro Calza

European Central Bank (ECB)

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

João Sousa

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: February 18, 2019

Abstract

Do negative policy rates hinder banks’ transmission of monetary policy? To answer this question, we examine the behaviour of Italian mortgage lenders using a novel loan-level dataset. When policy rates turn negative, banks with higher ratios of retail overnight deposits to total assets charge more on new fixed rate mortgages. This suggests that the funding structure of banks may matter for the transmission of negative policy rates, especially for long-maturity illiquid assets. Nevertheless, the aggregate economic implications for households are small, suggesting that concerns about inefficient monetary policy transmission to households under modestly negative rates are likely overstated.

Keywords: monetary policy, negative interest rates, bank lending, mortgages

JEL Classification: E40, E52, E58, G21

Suggested Citation

Amzallag, Adrien and Calza, Alessandro and Georgarakos, Dimitris and Soucasaux Meneses e Sousa, João Miguel, Monetary Policy Transmission to Mortgages in a Negative Interest Rate Environment (February 18, 2019). ECB Working Paper No. 2243 (2019); ISBN 978-92-899-3505-0 . Available at SSRN: https://ssrn.com/abstract=3337414

Adrien Amzallag (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alessandro Calza

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

João Miguel Soucasaux Meneses e Sousa

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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