Passing on negative interest rates
Since the ECB has lowered the interest rate on deposits into negative territory, more and more commercial banks are also passing on this negative interest rate to their customers. The main aim of this paper is to answer the question under which conditions the commercial banking sector will be more o...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Sciendo
2020-12-01
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| Series: | International Journal of Management and Economics |
| Subjects: | |
| Online Access: | https://doi.org/10.2478/ijme-2020-0022 |
| _version_ | 1811331356846718976 |
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| author | Stadtmann Georg Moritz Karl-Heinz Berthold Kristin Stadtmann Tobias |
| author_facet | Stadtmann Georg Moritz Karl-Heinz Berthold Kristin Stadtmann Tobias |
| author_sort | Stadtmann Georg |
| collection | DOAJ |
| description | Since the ECB has lowered the interest rate on deposits into negative territory, more and more commercial banks are also passing on this negative interest rate to their customers. The main aim of this paper is to answer the question under which conditions the commercial banking sector will be more or less reluctant to pass the negative deposit rate on to its private customers. We first clarify the circumstances under which demand deposits and excess liquidity arise, and what role quantitative easing plays in this context. Within a game-theoretical framework, it is derived that the pressure to pass on the negative interest rate is particularly high if there are no switching costs, and the banking market follows a Bertrand competition. |
| first_indexed | 2024-04-13T16:19:04Z |
| format | Article |
| id | doaj.art-9ea0900d62a84aeebd33b5a68f682957 |
| institution | Directory Open Access Journal |
| issn | 2299-9701 |
| language | English |
| last_indexed | 2024-04-13T16:19:04Z |
| publishDate | 2020-12-01 |
| publisher | Sciendo |
| record_format | Article |
| series | International Journal of Management and Economics |
| spelling | doaj.art-9ea0900d62a84aeebd33b5a68f6829572022-12-22T02:39:59ZengSciendoInternational Journal of Management and Economics2299-97012020-12-0156428329010.2478/ijme-2020-0022Passing on negative interest ratesStadtmann Georg0Moritz Karl-Heinz1Berthold Kristin2Stadtmann Tobias3Europa-Universität Viadrina, GermanyFachhochschule Erfurt, GermanyEuropa-Universität Viadrina, GermanyRobert Schuman Berufskolleg, GermanySince the ECB has lowered the interest rate on deposits into negative territory, more and more commercial banks are also passing on this negative interest rate to their customers. The main aim of this paper is to answer the question under which conditions the commercial banking sector will be more or less reluctant to pass the negative deposit rate on to its private customers. We first clarify the circumstances under which demand deposits and excess liquidity arise, and what role quantitative easing plays in this context. Within a game-theoretical framework, it is derived that the pressure to pass on the negative interest rate is particularly high if there are no switching costs, and the banking market follows a Bertrand competition.https://doi.org/10.2478/ijme-2020-0022excess liquiditypenalty interestgame theoryinvestor behaviorg21e43e52 |
| spellingShingle | Stadtmann Georg Moritz Karl-Heinz Berthold Kristin Stadtmann Tobias Passing on negative interest rates International Journal of Management and Economics excess liquidity penalty interest game theory investor behavior g21 e43 e52 |
| title | Passing on negative interest rates |
| title_full | Passing on negative interest rates |
| title_fullStr | Passing on negative interest rates |
| title_full_unstemmed | Passing on negative interest rates |
| title_short | Passing on negative interest rates |
| title_sort | passing on negative interest rates |
| topic | excess liquidity penalty interest game theory investor behavior g21 e43 e52 |
| url | https://doi.org/10.2478/ijme-2020-0022 |
| work_keys_str_mv | AT stadtmanngeorg passingonnegativeinterestrates AT moritzkarlheinz passingonnegativeinterestrates AT bertholdkristin passingonnegativeinterestrates AT stadtmanntobias passingonnegativeinterestrates |