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Monetary policy and bank profitability in a low interest rate environment: a follow-up and a rejoinder

Goodhart, C. A. E. and Kabiri, Ali (2019) Monetary policy and bank profitability in a low interest rate environment: a follow-up and a rejoinder. CEPR discussion papers (DP13752). Centre for Economic Policy Research (CEPR), London, UK.

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Abstract

There is a debate about the effect of the extremely low, or even negative, interest rate regime on bank profitability. On the one hand it raises demand and thereby adds to bank profits, while on the other hand it lowers net interest margins, especially at the Zero Lower Bound. In this paper we review whether the prior paper by Altavilla, Boucinha and Peydro (2018) on this question for the Eurozone can be generalized to other monetary blocs, i.e. USA and UK. While our findings have some similarity with their earlier work, we are more concerned about the possible negative effects of this regime, not only on bank profitability but also on bank credit extension more widely.

Item Type: Monograph (Discussion Paper)
Official URL: https://cepr.org/
Additional Information: © The Authors
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
Date Deposited: 05 Jun 2019 13:33
Last Modified: 18 Oct 2019 23:27
URI: http://eprints.lse.ac.uk/id/eprint/100968

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