Working Paper: Modest pass-through of monetary policy to retail rates but no reversal

Working Paper - April 2020 - No. 154

Authors Spange, Morten; Adolfsen, Jakob
Subject Monetary policy; Monetary-policy transmission; Rate of interest on certificates of deposit; Rates and foreign-exchange
Type Working paper
Year 2020
Published 3 April 2020
Monetary policy rates are negative in a number of countries, including Denmark. Concern has been expressed that negative rates may, in some cases, have had undesirable effects on bank lending rates. We show that in Denmark, pass-through to bank lending rates remains positive, and we do not find indications to suggest that negative rates have weakened bank lending. The pass-through of monetary policy interest rates to bank lending rates slowed around the financial crisis, and we show that this is driven primarily by the banks with the highest risk exposure before the crisis.