Are Negative Nominal Interest Rates Expansionary?
Following the crisis of 2008 several central banks engaged in a radical new policy experiment by setting negative policy rates. Using aggregate and bank-level data, we document a collapse in pass-through to deposit and lending rates once the policy rate turns negative. Motivated by these empirical f...
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| Veröffentlicht in: | NBER Working Paper Series 2017-11, p.24039 |
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| creator | Juelsrud, Ragnar Wold, Ella Eggertsson, Gauti B |
| description | Following the crisis of 2008 several central banks engaged in a radical new policy experiment by setting negative policy rates. Using aggregate and bank-level data, we document a collapse in pass-through to deposit and lending rates once the policy rate turns negative. Motivated by these empirical facts, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rates turns negative the usual transmission mechanism of monetary policy breaks down. Moreover, because a negative interest rate on reserves reduces bank profits, the total effect on aggregate output can be contractionary. |
| doi_str_mv | 10.3386/w24039 |
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| identifier | ISSN: 0898-2937 |
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| source | National Bureau of Economic Research Publications; Alma/SFX Local Collection |
| subjects | Asset acquisitions Bank deposits Bank reserves Banking industry Central banks Commercial banks Economic crisis Economic models Economic theory Economics Inflation Interest rates-deposits Macroeconomics Monetary Economics Monetary policy Profits |
| title | Are Negative Nominal Interest Rates Expansionary? |
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