NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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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
Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data su...
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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