The Role of Low and Negative Interest Rates for Financial Stability (Based on Eurozone Countries’ Experience)

Student: Guzanov Vladislav

Faculty: Faculty of World Economy and International Affairs

Educational Programme: World Economy (Bachelor)

Year of Graduation: 2018

The economy of the eurozone has been in the deflationary phase for several years. Overcoming the deflation problem has forced the European Central Bank to apply nonconventional instruments of monetary policy: quantitative easing and negative interest rates. Although the policy of low and negative interest rates is primarily aimed at achieving price stability, it also has an impact on the financial stability of the eurozone. In this coursework we analyze the impact of the ECB's policy of negative interest rates on the financial stability of government finances, nonfinancial companies, households and the banking sector. The ECB's effective interest rate was estimated by means of an econometric model of real options based on key indicators of the banking sector of several euro area countries.

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