Monetary Policy, Household Portfolios and Bank Deposits

We examine how monetary policy shocks affect the allocation of household assets between bank deposits and securities. Our analysis is based on monthly, account-level data covering itemized securities and deposit holdings for a large sample of retail bank clients. In our main analysis, we examine the response of households portfolios to the unexpected introduction of a negative policy rate in Switzerland in January 2015 and the contemporaneous lifting of an exchange rate floor between the Swiss Franc and the Euro.

We document a statistically significant, but economically small shift in household assets from fixed income securities towards bank deposits. This shift is driven both by passive valuation effects as well as by active changes in investment flows. Exploring heterogeneity across client types, we find that the reallocation of assets is more pronounced among higher-wealth clients and active investors.

Martin Brown is Director of the Study Center Gerzensee and a Professor of Financial Economics at the University of St.Gallen (adjunct). He is also a research associate at ZEW Leibniz Centre for European Economic Research. He holds a doctoral degree in economics from the University of Zürich. His current research focusses on financial intermediation and household finance.