Economics, Econometrics and Finance
3 years ago

Negative interest rates in Japan lead to risky loans and decreased investments.

SSRN Electronic Journal
Credit Allocation and Real Effects of Negative Interest Rates: New Micro-Evidence from Japan
Kiyotaka Nakashima, Koji Takahashi

Paper Summary

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The negative interest rate policy in Japan reduced loans from banks with more reserves, leading to increased lending to riskier firms. Firms borrowing from banks exposed to negative rates decreased fixed investments. Banks relying more on deposits did not experience a reversal rate.