Title: Do monetary policy expectations influence transmission mechanism of Danish interbank market under the negative interest rate policy?

Authors: Takayasu Ito

Addresses: School of Commerce, Meiji University, Chiyoda-ku, Tokyo 101-8301, Japan

Abstract: In Denmark, monetary policy expectations have some impact on the interbank interest rates in the maturities of one, three and six months. The Danish central bank is successful, to some extent, in influencing the interbank interest rates in the maturities from one to six months through communication with financial markets. But the maturities from nine to 12 months are beyond their control. This fact indicates that market segmentation is observed in the short-term money market in Denmark. The ordinary transmission mechanism of interbank interest rates does not function because of the increased fluctuations in money market rates under a negative interest rate policy. It is therefore suggested that a negative interest rate policy presents complications that could limit policy effectiveness. Negative interest rate policy presents complications that could limit policy effectiveness.

Keywords: interbank interest rate; Denmark; monetary policy expectations; negative interest rate policy.

DOI: 10.1504/IJBD.2017.088512

International Journal of Bonds and Derivatives, 2017 Vol.3 No.3, pp.223 - 234

Received: 13 Dec 2016
Accepted: 08 Mar 2017

Published online: 11 Dec 2017 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article