NBER

Ragnar Juelsrud

Norges Bank
Postboks 1179 Sentrum
0107 Oslo
Norway

E-Mail: ragnar@juelsrud.no
Institutional Affiliation: BI Norwegian Business School

NBER Working Papers and Publications

January 2019Negative Nominal Interest Rates and the Bank Lending Channel
with Gauti B. Eggertsson, Lawrence H. Summers, Ella Getz Wold: w25416
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.
November 2017Are Negative Nominal Interest Rates Expansionary?
with Gauti B. Eggertsson, Ella Getz Wold: w24039
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.

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