Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area

Alexander Rodnyansky (Cambridge University)

April 12, 2022

BDF Paris

Séminaire Banque de France


In the presence of negative monetary-policy rates and a zero lower bound on deposit rates, banks that are more exposed to central banks’ asset-purchase programs reduce their lending to the real economy by more than their counterparts. When banks face a lower bound on customer deposit rates, an asset swap between securities and reserves reduces banks’ net worth as the cost of holding reserves cannot be matched with a reduction in their cost of funding. Exploiting euro-area syndicated lending data and the German credit registry, we provide evidence that deposit-reliant banks with relatively higher funding costs and greater exposure to large-scale asset purchases reduce corporate lending relatively more, have lower stock returns, and rebalance their interbank lending from safe to risky countries.


Negative Interest Rates; Quantitative Easing; Unconventional Monetary Policy; Bank Lending Channel;

JEL codes

  • E52: Monetary Policy
  • E58: Central Banks and Their Policies
  • G21: Banks • Depository Institutions • Micro Finance Institutions • Mortgages