OUR WORK
SECO – Interest rates
RESEARCH PROJECT
The impact of an interest rate cut on corporate activities in a low interest rate environment
Staatssekretariat für Wirtschaft SECO – Direktion für Wirtschaftspolitik – Wachstum und Wettbewerbspolitik
2021
In this project, we analyzed the effects of the Swiss National Bank’s interest rate cut into negative territory on firm behavior. Our results indicate that, despite the negative rates, the traditional effects of an interest rate reduction on firm activity remain intact. We found a robust association between the negative interest rate shock and firm investment and employment.
We employed a panel regression with local projections. Initially, we used CompNet data, encompassing a full sample of European countries, to conduct tests across countries and industries. Subsequently, we utilized firm-level data from Orbis to compare the behavior of Swiss firms (the treatment group) with German firms (our main specification) and firms in Germany, Austria, Belgium, France, and the Netherlands (our robustness check) that are active in the same industries (the control group).
A non-technical summary was also published in the economic policy magazine “Die Volkswirtschaft”: