change on the announcement day does not account for anticipation effects. Fourth, policy interest rate cuts of different sizes are treated equally.

Following NIRP announcements, money market rates on average declined by 2 to 3 basis points, 2-year sovereign bond yields dropped by close to 6 basis points and 10-year sovereign bond yields by nearly 4 basis points (Figure 9). Inflation expectations hardly moved around policy announcements, while developments in foreign exchange rate markets were mixed, with the sharp appreciation in the Swiss franc in January 2015 having a large influence on the sample average.

If the event window is extended up to one month, qualitatively similar but generally larger results are obtained, even though this longer window is likely to be influenced by factors unrelated to NIRP (Figure A.1). During a 30-day period, the median cumulative drop in 2-year and 10-year government bond yields was more than 15 basis points, reflecting a corresponding shift in policy rate expectations. Although the range of outcomes varies significantly across countries and events, NIRP appear to have been associated with the expected downward shift in the yield curve in most cases. Enduring changes in exchange rates and equity market indexes cannot be discerned from other factors affecting them over time.

Country-specific developments show significant variations (Figure A.2; Table A.2). The largest movements in money market rates and bond yields were observed in Switzerland, Japan, and Denmark, possibly reflecting the fact that policy rate cuts were more significant, or policy changes unexpected. NIRP announcements by the ECB were associated with relatively subdued drop in

**Figure 9. NIRP announcements: changes in selected financial variables over one-day window**

<!-- Start of picture text --> A. Money market rates and bond yields B. Inflation expectations, exchange rates, and<br>equities<br>Basis points2 Average Median Basis points Average Median Percent<br>2 2<br>0<br>1 1<br>-2<br>-4 0 0<br>-6<br>-1 -1<br>NEER (RHS)<br>2-year 10-year Equities (RHS)<br>1-month 3-month government bond yields government bond yields 10-year inflation<br>interbank rate interbank rate expectations<br><!-- End of picture text --> Sources: Bloomberg, Haver Analytics, European Central Bank, Riksbank, Danmarks Nationalbank, Swiss National Bank, Bank of Japan, Central Bank of Hungary, World Bank. Notes: Basis points or percent change between closing values on the day before the NIRP announcement and closing values on the day of the announcement. Pooled average and median across NIRP announcements by five major central banks: the European Central Bank, the Bank of Japan, the Swiss National Bank, the Swedish Riksbank and Danmarks Nationalbank. The government bond yields are on benchmark bonds for each country, except for the European Central Bank events where they are from the ECB’s euro area fitted yield curve. 10-year inflation expectations are derived from inflation swaps rates (not available for Switzerland). NEER is the nominal effective exchange rate; a decrease indicates depreciation. Equities are the main stock market index for each country, expressed in local currency.

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