Understanding Exchange Rate Behavior with Negative Interest Rates: Early Observations by Andrew K. Rose
In this study, Andrew K. Rose examines the exchange rate behavior in economies with negative nominal interest rates, focusing on the impact and implications of such rates on exchange rates. The findings suggest limited observable consequences on exchange rate behavior, with similarities in shocks driving negative nominal rates and low rates. The data set covers 61 currencies from January 2010 to May 2016, with a focus on exchange rates in the context of negative interest rates.
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Exchange Rate Behavior with Exchange Rate Behavior with Negative Interest Rates: Negative Interest Rates: Some Early Negative Some Early Negative Observations Observations Andrew K. Rose Berkeley-Haas, ABFER, CEPR and NBER (with Allaudeen Hameed)
Motivation Motivation In last decade, five economies experienced (non-trivial) negative nominal interest rates Denmark, EMU, Japan, Sweden, Switzerland (different monetary regimes!) Most focus on consequences of Negative Interest Rate Policy (NIRP): Growth, inflation Bank profitability, micro-structural effects Financial Stability Here, focus on exchange rate behavior Volatility, Uncovered Interest Parity Deviations (UIP) Literature: little work, no strong results Negative Nominal Interest Rates and Exchange Rates 2
Summary of Findings Summary of Findings NIRP: almost no observable consequences for exchange rate behavior Shocks that drive nominal rates negative similar to those when rates low Little evidence of non-linearities Exchange rates similar when interest rates in (0, .25%) and (-.25%, 0) Negative Nominal Interest Rates and Exchange Rates 3
Data Set Data Set Time span short, hence maximize scope of necessarily limited data set Include 61 currencies/economies countries Begin January 2010 (post GFC), continue through May 2016 Daily (highest frequency with many countries) Switzerland usually base First negative nominal rates; longest span of time; most negative rates Sensitivity with US$, GBP, Euro as alternatives Negative Nominal Interest Rates and Exchange Rates 4
Data Set, continued Data Set, continued Bilateral rates at 4pm London Mid-point, ignoring bid/ask Spot, 1 month (=21 business day) forwards Longer horizon reduces sample size excessively Effective exchange rates from Bank of England LIBOR fixings for interest rates 5 economies only (EMU, Japan, Switzerland, UK, USA) Otherwise 1-m Euro-currency interbank deposit rates (additional 8 countries) Otherwise Datastream 30-day deposit rates Sensitivity check: interest rates implicit in forward premium Sensitivity check: official interest rates Negative Nominal Interest Rates and Exchange Rates 5
Country List Country List Australia1 Botswana4 Chile Croatia4 Egypt4 Ghana Iceland1 Israel1 Kazakhstan2,4 Kuwait3 Malaysia2 Norway1 Pakistan2 Poland Russia Singapore1,2 Sweden1 Thailand2 Uganda USA1 Bahrain3 Bulgaria3 China2,4 Czech. Rep.1,4 EMU1 Hong Kong1,2,3 India2 Japan1,2 Kenya Latvia1,3 Mexico New Zealand1 Peru Qatar3 Saudi Arabia3 South Africa Switzerland Tunisia4 UK1 Vietnam2,4 Argentina Brazil Canada1 Colombia Denmark1,3 Estonia1,3 Hungary Indonesia2 Jordan3 Korea1,2 Lithuania1,3 Morocco3 Oman3 Philippines2 Romania Serbia Sri Lanka2 Taiwan1,2 Turkey2 United Arab Rep.3 Zambia Negative Nominal Interest Rates and Exchange Rates 6
First Look First Look Swiss interest rates go negative briefly in August 2011 Follows sudden Swiss Franc appreciation SNB diagnoses massive overvaluation , loosens to protect competitiveness, reduce deflationary pressure September 2011: SNB places floor on Euro/Swiss Franc exchange rate January 2015: exchange rate constraint removed, jump appreciation, NIRP begins in earnest NIRP endogenous to FX rates Negative Nominal Interest Rates and Exchange Rates 7
Swiss Interest and Effective Exchange Rates Swiss Interest and Effective Exchange Rates Swiss Interest and Effective Exchange Rates 180 .5 Interest Exchange 160 0 Exchange Rate Interest Rate 140 -.5 120 -1 01 Jan 10 LIBOR 1-month interest rate; EER index from Bank of England; 1990=100 01 Jan 12 01 Jan 14 01 Jan 16 Negative Nominal Interest Rates and Exchange Rates 8
Bilateral (Swiss) Exchange Rates Bilateral (Swiss) Exchange Rates and National Interest Rates and National Interest Rates Swiss Exchange and National Interest Rates United States EMU 1.4 1.5 .5 1 American interest .4 Interest 1 Euro interest 1.2 Exchange Euro/CHF US$/CHF Interest Exchange .9 .3 .5 .8 1 .2 0 .7 -.5 .1 .8 8/2011 1/2015 8/2011 1/2015 01 Jan 10 01 Jan 12 01 Jan 14 01 Jan 16 01 Jan 10 01 Jan 12 01 Jan 14 01 Jan 16 Japan United Kingdom 140 .6 .65 .7 .75 .8 .85 .8 .15 Exchange Japanese interest British interest .1 Interest 120 Exchange GBP/CHF .7 Yen/CHF .05 100 .6 0 Interest -.05 80 .5 -.1 8/2011 1/2015 8/2011 1/2015 01 Jan 10 01 Jan 12 01 Jan 14 01 Jan 16 01 Jan 10 01 Jan 12 01 Jan 14 01 Jan 16 Negative Nominal Interest Rates and Exchange Rates 9
Little Linkage Between EER Volatility Little Linkage Between EER Volatility and Interest Rate Level and Interest Rate Level Measure volatility as standard deviation (over month) of first- differences of natural logarithms No relationship between exchange rate volatility and interest rate level Even for negative nominal interest rates! Negative Nominal Interest Rates and Exchange Rates 10
Effective Exchange Rate Volatility Effective Exchange Rate Volatility and Interest Rates: Switzerland and Interest Rates: Switzerland Switzerland Monthly observations 4 1/2015 Slope=-.18 (.15) Exchange rate volatility 3 9/2011 2 8/2011 1 0 -1 -.5 0 .5 Interest rate Standard deviation of change in daily log effective exchange rate (%); 30-day annualized interest rate Negative Nominal Interest Rates and Exchange Rates 11
Also True of Other Currencies Also True of Other Currencies US $, Euro, Yen, Pound Sterling, Danish Krone, Swedish Krone 4 more currencies with NIRP Still no strong linkage between exchange rate volatility and interest rate level Some signs of positive linkage Nothing unusual when nominal interest rate becomes negative! Negative Nominal Interest Rates and Exchange Rates 12
Effective Exchange Rate Volatility Effective Exchange Rate Volatility and Interest Rates: Others and Interest Rates: Others Exchange Rate Volatility and Interest Rates Monthly observations United States EMU Denmark 1.2 1.2 1.2 Exchange rate volatility Slope=.62 (.18) Slope=.08 (.03) Slope=-.01 (.01) .8 .8 .8 .4 .4 .4 0 0 0 -.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5 Japan United Kingdom Sweden 1.2 1.2 Exchange rate volatility 1.2 Slope=.02 (.17) Slope=.03 (.01) Slope=.80 (.51) .8 .8 .8 .4 .4 .4 0 0 0 -.5 0 .5 Interest rate 1 1.5 2 2.5 -.5 0 .5 Interest rate 1 1.5 2 2.5 -.5 0 .5 Interest rate 1 1.5 2 2.5 Standard deviation of change in daily log effective exchange rate (%); 30-day annualized interest rate Negative Nominal Interest Rates and Exchange Rates 13
Econometric Verification Econometric Verification Regress effective exchange rate volatility against interest rate level and dummy for NIRP 11 economies with effective rates (Australia, Canada, Denmark, Euro, Japan, New Zealand, Norway, Sweden, Switzerland, UK, and USA) 5 have NIRP (Denmark, Euro, Japan, Sweden, Switzerland) Include country-specific FE (effi, ) = + interest, + NegDummyi, + i, NegDummyi, is 1 if i has negative nominal interest rate at time , 0 ow Negative Nominal Interest Rates and Exchange Rates 14
Regressions of Effective Regressions of Effective Exchange Rate Volatility on Interest Volatility on Interest Rates Exchange Rate Rates Interest Rate Level Dummy, Negative Interest Rate Obs. Default .90 (1.52) 1.22 (2.78) 869 Negative Nominal Interest Rates and Exchange Rates 15
Sensitivity Analysis Sensitivity Analysis Interest Rate Level Dummy, Negative Interest Rate Observations Add Time FE Without Country FE Official (not market) interest rates 2011 -2.48 (1.50) 4.54** (.58) 2.70 (1.62) .38 (10.9) 9.62** (3.19) -15.7 (16.7) -.70 (5.52) -11.84 (15.53) -.88 (1.63) -10.75 (7.16) .56 (1.08) -4.81 (2.52) -12.9** (3.1) 7.35* (3.01) n/a 869 869 869 132 2012 7.04 (4.37) 3.12 (7.42) -2.91 (5.66) -9.17 (23.29) .39 (3.34) -2.54 (4.40) 1.53 (1.92) 143 2013 132 2014 143 2015 132 Without Fixers Only lowest half by interest rate Without > |2 | Outliers 790 435 844 Negative Nominal Interest Rates and Exchange Rates 16
True in Bilateral Rates too True in Bilateral Rates too Russia only exception to insignificant slope But minimal Russia interest rate >3% (average >7%) No sign that negative nominal rates matter Negative Nominal Interest Rates and Exchange Rates 17
Bilateral Exchange Rate Volatility Bilateral Exchange Rate Volatility and Interest Rates and Interest Rates Bilateral Exchange Rate Volatility and Interest Rates Monthly observations Australia China India 1/2015 0 1 2 3 0 1 2 3 1/2015 0 1 2 3 1/2015 Volatility 2 3 4 5 6 2 4 6 8 4 6 8 10 Indonesia Korea Pakistan 1/2015 1/2015 0 1 2 3 1/2015 0 1 2 3 0 1 2 3 Volatility 4 5 6 7 8 1.5 2 2.5 3 3.5 6 8 10 12 14 Russia Taiwan Turkey 12/2014 1/2015 0 2 4 6 0 1 2 3 0 1 2 3 4 Volatility 1/2015 1/2015 5 10 15 20 .4 .5 National interest rate .6 .7 .8 4 6 8 10 12 National interest rate National interest rate Standard deviation of change in daily log bilateral Swiss exchange rate (%); 30-day annualized interest rate Negative Nominal Interest Rates and Exchange Rates 18
Pooling Bilateral Rates Pooling Bilateral Rates Same conclusion Interpretation more difficult because of high dependency across countries in bilateral exchange rates But can zoom onto small interest rates (-.6, .6%) Ditto very small interest rates (-.2, .2%) Negative Nominal Interest Rates and Exchange Rates 19
Bilateral Exchange Rate Volatility Bilateral Exchange Rate Volatility and Interest Rates: Pooling and Interest Rates: Pooling Bilateral Exchange Rate Volatility and Interest Rates Monthly observations, combined across countries/time Exchange rate volatility Exchange rate volatility 8 8 6 6 4 4 2 2 0 0 -1 -.5 Swiss interest rate 0 .5 0 10 20 30 National interest rate Exchange rate volatility Exchange rate volatility All Outliers 1/2015 4 4 DNK BGR CZE SWE EUR 3 3 JPN 2 2 1 1 0 0 -.6 -.3 National interest rate < .6% 0 .3 .6 -.2 -.1 0 .1 .2 -.2% < National interest rate < .2% Standard deviation of change in daily log bilateral Swiss exchange rate (%); 30-day annualized interest rate Negative Nominal Interest Rates and Exchange Rates 20
Quick Summary Quick Summary Little evidence that negative nominal interest rates have affected exchange rate volatility But NIRP sometimes prompted by concerns about level of exchange rate (Denmark, Switzerland) Now move from second- to first-moment of exchange rate Negative Nominal Interest Rates and Exchange Rates 21
Uncovered Interest Parity Uncovered Interest Parity Well-known: UIP fails badly in literature Often ex post changes in exchange rates negatively correlated with forward premium! Does the UIP relationship change in the presence of negative nominal interest rates? Essentially compare ex post one-month change in bilateral Swiss exchange rate to forward premium Negative Nominal Interest Rates and Exchange Rates 22
What Does the Data Say? What Does the Data Say? Pooling entails much dependency across Time (prediction horizon > data frequency) handle with monthly data Countries (cross-sectional dependency) handle with care! Little sign of any strong positive relationship But slope is positive, both for a) whole sample; b) observations with one negative interest rate (half of sample) Negative Nominal Interest Rates and Exchange Rates 23
Monthly Exchange Rate Changes Monthly Exchange Rate Changes and Forward Premia and Forward Premia One-Month Exchange Rate Change and Forward Premia Monthly Observations Whole Sample (4492 obs) One Negative Interest Rate (2084 obs) Exchange Rate Change 15 30 15 30 0 0 -30 -15 -30 -15 Slope=.39 (.18) Slope=.56 (.19) 0 2 4 6 8 10 0 2 4 6 8 10 Positive Interest Rates (2354 obs) Two Negative Interest Rates (15 obs) Exchange Rate Change 15 30 0 1 2 0 -2 -1 -30 -15 Slope=31 (18) Slope=-.10 (.23) 0 2 4 6 8 10 .02 .04 .06 .08 .1 Forward Premium Forward Premium 60 currencies/Swiss Franc, 1/2010-5/2016, without Argentina 11/2015 Negative Nominal Interest Rates and Exchange Rates 24
Positive Results Warrant Further Investigation Positive Results Warrant Further Investigation Zoom into periods of different Swiss interest rates Histogram suggests: a) periods of very negative rates; and b) periods 0 Swiss interest rates very negative(<-.5%): no relationship Swiss interest rates tiny positive (<.1%): no relationship Swiss interest rates tiny negative (>-.1%): positive relationship Statistically significant but poor fit, few observations Statistically different slope as interest rates positive/negative Negative Nominal Interest Rates and Exchange Rates 25
Monthly Exchange Rate Changes Monthly Exchange Rate Changes and Forward Premia: Zooming In and Forward Premia: Zooming In Exchange Rates during Small/Negative Interest Rates One-Month Exchange Rate Changes and Forward Premia Histogram Tiny Positive Interest Swiss interest (0,.1%) 10 15 20 25 Exchange rate change .1 .2 .3 Density 0 -.2-.1 0 5 Slope=.08 (.22) -1 -.75 -.5 -.25 0 .25 0 .02 .04 .06 .08 .1 Swiss Interest Rate Forward premium Negative Interest Rate Tiny Negative Interest Swiss interest <-.5% Swiss interest (-.1%,0) Exchange rate change Exchange rate change .3 .1 .2 .3 .15 0 0 -.15 -.2-.1 Slope=.93 (.20) -.3 Slope=.43 (.25) 0 .02 .04 .06 .08 0 .02 .04 .06 .08 .1 Forward premium Forward premium Monthly observations for 60 currencies/Swiss Franc, 1/2010-5/2016, without Argentina 11/2015 Negative Nominal Interest Rates and Exchange Rates 26
Even More Investigation Even More Investigation Switch to Euro; many more observations with interest rates close to zero (both positive and negative) Euro interest rates miniscule positive (<.05%): negative relationship Euro interest rates miniscule negative (>-.05%): no relationship Quite different from Swiss Franc (none/significantly positive) Statistical analogue to come Negative Nominal Interest Rates and Exchange Rates 27
Monthly Exchange Rate Changes Monthly Exchange Rate Changes and Forward Premia: Zooming Into the Euro and Forward Premia: Zooming Into the Euro Exchange Rates with Similar/Dissimilar Interest Rates One-Month Exchange Rate Change and Forward Premia Positive Miniscule Positive Euro interest >=1.25%, 236 Obs Euro interest [0,.05%], 231 Obs Exchange Rate Change .3 .1 .2 Slope=.17 (.87) Slope=-.13 (.01) 0 0 -.2 -.1 -.3 -.025 0 .025 .05 .075 .1 0 .03 .06 .09 Negative Miniscule Negative Exchange Rate Change Euro interest <=-.25%, 114 Obs Euro interest [-.05%,0), 171 Obs .3 .1 .2 Slope=-.69 (1.16) Slope=.35 (.19) 0 0 -.2 -.1 -.3 -.025 0 .025 Forward premium .05 .075 .1 0 .03 Forward premium .06 .09 Monthly observations for 60 currencies/Euro, without Argentina 11/2015 Negative Nominal Interest Rates and Exchange Rates 28
Testing UIP Testing UIP Estimate: log(si,t+21)-log(si,t) = + [log(fi,t+21,t)-log(si,t)] + Onei,t + Bothi,t + i,t+21,t Notes: No risk premium, rational expectations, large sample: =0, =1, = =0 Much of literature has <1 (often negative) MA errors, so use Newey-West standard errors Negative Nominal Interest Rates and Exchange Rates 29
Fama Regressions: NIRP as intercept Fama Regressions: NIRP as intercept Slope Intercept One Negative Interest Rate Two Negative Interest Rates Observations Prevalence 50% 49% 1% 93,937 Common Intercept .59** (.12) .16** (.06) 93,937 Default .58** (.13) .13* (.07) .07 (.08) -.57** (.16) 93,937 Country FE .61** (.16) n/a .10 (.08) -.87** (.20) 93,937 Negative Nominal Interest Rates and Exchange Rates 30
Results Results UIP works poorly: easily reject =0, =1 Doesn t change with NIRP dummies Results robust to robustness checks But UIP works better than usual ( >0) Can also check if slopes vary by NIRP (multiplicative, not additive) Negative Nominal Interest Rates and Exchange Rates 31
Fama Regressions: NIRP as slope Fama Regressions: NIRP as slope No Negative Interest Rates One Negative Interest Rate Two Negative Interest Rates Observations Default -.06 (.11) -.14 (.16) .74** (.14) .78** (.13) -14** (3) -17** (4) 93,937 Country FE 93,937 US$ Base .20* (.08) .51** (.11) n/a 88,979 Euro Base -.02 (.11) .76** (.13) -2.11 (1.80) 93,937 Negative Nominal Interest Rates and Exchange Rates 32
Promising Results Warrant Investigation Promising Results Warrant Investigation Use regression discontinuity approach to focus on importance of negative rates Use Euro rates (many observations with interest rates 0) on: log(si,t+21)-log(si,t) = [( P+ P)*POSi,t] [log(fi,t+21,t)-log(si,t)] + [( N+ N)*NEGi,t] [log(fi,t+21,t)-log(si,t)] + i,t+21,t Where POS/NEG is dummy for country i with positive/negative interest rates Negative Nominal Interest Rates and Exchange Rates 33
Testing for Slope Testing for Slope Discontinuity of of Fama Fama Regression Regression Discontinuity Size of Euro Interest rate Equality Test (p-value) Observations Euro Interest Rate Positive Negative In +/- .05% .25 (.32) -.19 (.20) 1.5 (.22) 9,526 In +/- .10% .76 (.45) -.23 (.16) 1.3 (.25) 37,742 In +/- .15% .42 (.27) .27 (.16) .3 (.62) 42,919 In +/- .20% .77 (.11) .37 (.17) 4.2* (.04) 47,188 In +/- .25% .75 (.11) .47 (.17) 2.0 (.16) 54,689 Negative Nominal Interest Rates and Exchange Rates 34
Another Approach: Carry Trade Returns Another Approach: Carry Trade Returns Carry trade relies on UIP deviations Consensus in literature of positive but risky returns (Burnside et al) We ask Do carry trade returns vary with negative nominal interest rates? Negative Nominal Interest Rates and Exchange Rates 35
Constructing Carry Trade Returns Constructing Carry Trade Returns 1. Begin with Swiss Franc as default currency to measure cumulative returns. Also use Pound Sterling and American dollar for sensitivity 2. Each month, sort all 60 currencies (excluding base) by interest rate Use interest rates implied by CIP through forward premium Also use explicit interest rates 3. Form two portfolios Short portfolio with lowest three interest rates (equally weighted) Long portfolio with highest three interest rates Also consider portfolios with five and ten currencies 4. Construct returns for (long, short and) long minus short portfolios 5. Each month, repeat steps 2-4 Negative Nominal Interest Rates and Exchange Rates 36
Carry Trade Returns Carry Trade Returns Flow and Cumulative Excess Returns Returns from long-short strategies in 3 base currencies (# currencies/portfolio) Swiss Franc, (3) Swiss Franc, (5) Swiss Franc, (10) Cumulative returns Flow returns 0 75 150 0 75 150 0 75 150 10 10 10 0 0 0 -10 -10 -10 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Pound Sterling, (3) Pound Sterling, (5) Pound Sterling, (10) Cumulative returns Flow returns 0 75 150 0 75 150 0 75 150 10 10 10 0 0 0 -10 -10 -10 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 American Dollar, (3) American Dollar, (5) American Dollar, (10) Cumulative returns Flow returns 0 75 150 0 75 150 0 75 150 10 10 10 0 0 0 -10 -10 -10 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Flow/cumulative returns: thin/thick, solid/dashed line, left/right axis. Implicit interest rates. Negative Nominal Interest Rates and Exchange Rates 37
Using Explicit Interest Rates Using Explicit Interest Rates Flow and Cumulative Excess Returns Returns from long-short strategies in 3 base currencies (# currencies/portfolio) Swiss Franc, (3) Swiss Franc, (5) Swiss Franc, (10) Cumulative returns Excess returns 0 25 50 0 25 50 0 25 50 5 5 5 -5 -5 -5 -15 -15 -15 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Pound Sterling, (3) Pound Sterling, (5) Pound Sterling, (10) Cumulative returns Excess returns 0 25 50 0 25 50 0 25 50 5 5 5 -5 -5 -5 -15 -15 -15 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 American Dollar, (3) American Dollar, (5) American Dollar, (10) Cumulative returns Excess returns 0 25 50 0 25 50 0 25 50 5 5 5 -5 -5 -5 -15 -15 -15 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 % Flow/cumulative returns: thin/thick, solid/dashed line, left/right axis. LIBOR/Euro/National interest rates. Negative Nominal Interest Rates and Exchange Rates 38
Carry Trade Returns Carry Trade Returns Pervasive but risky Higher with fewer currencies in portfolios But do returns vary with NIRP? Estimate: CARRYc,s,i,t= + NEGt + c,s,i,t CARRYc,s,i,t monthly flow carry-trade return measured in currency c, with s currencies in both long/short portfolios, using measure i of interest rates (implicit in forward rates/explicit) at month t, NEGt importance of negative interest rates at t(Any? number?) Negative Nominal Interest Rates and Exchange Rates 39
Returns from Long Returns from Long- -Short and and Negative Interest Negative Interest Rates Short Portfolios Portfolios Rates Currency Portfolio Size Interest Rates Number of Negative Interest Rate Any Negative Interest Rates Swiss Franc 3 Implicit .002 (.002) .006 (.007) Swiss Franc 5 Implicit .001 (.001) .007 (.006) Swiss Franc 10 Implicit .000 (.001) .002 (.004) Pound Sterling 3 Implicit .002 (.002) .007 (.007) American Dollar 3 Implicit .002 (.002) .006 (.007) Swiss Franc 3 National -.003 (.002) -.005 (.007) Negative Nominal Interest Rates and Exchange Rates 40
Negative Results Negative Results No evidence that carry trade returns depend on negative nominal interest rates Negative Nominal Interest Rates and Exchange Rates 41
Conclusion Conclusion No evidence of strong effects of NIRP on exchange rate behavior Volatility unaffected by level of interest rates, especially around 0 UIP works better recently, but no differences around 0 interest rates Carry trade returns unaffected Caveat: have ignored most consequences of NIRP Growth, inflation Bank profitability, micro-structural effects Financial Stability Another caveat: limited sample Only 5 economies for limited period of time Negative Nominal Interest Rates and Exchange Rates 42
