Negative Nominal Interest Rates and the Bank Lending Channel

Gauti Eggertsson, Ragnar Juelsrud, Lawrence Summers and Ella Getz Wold

No 25416, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the bank lending channel of negative nominal policy rates from an empirical and theoretical perspective. We find that retail household deposit rates are subject to a lower bound (DLB). Empirically, once the DLB is met, the pass-through to lending rates and credit volumes is substantially lower and bank equity values decline in response to further policy rate cuts. We construct a banking sector model and use our estimate of the pass-through of negative policy rates to lending rates as an identified moment to parameterize the model and assess the impact of negative policy rates in general equilibrium. Using the theoretical framework, we derive a sufficient statistic for when negative policy rates are expansionary and when they are not.

JEL-codes: E3 E31 E4 E41 E42 E43 E44 E5 E51 E52 E58 E65 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (166)

Published as Gauti B Eggertsson & Ragnar E Juelsrud & Lawrence H Summers & Ella Getz Wold, 2024. "Negative Nominal Interest Rates and the Bank Lending Channel," Review of Economic Studies, vol 91(4), pages 2201-2275.

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Journal Article: Negative Nominal Interest Rates and the Bank Lending Channel (2024)
Working Paper: Negative nominal interest rates and the bank lending channel (2019)
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