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Are Negative Nominal Interest Rates Expansionary? / Gauti B. Eggertsson, Ragnar E. Juelsrud, Ella Getz Wold.
- Format:
- Book
- Author/Creator:
- Eggertsson, Gauti B.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24039.
- NBER working paper series no. w24039
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- 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.
- Notes:
- Print version record
- November 2017.
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