Eggertsson, Gauti B. <br/><br/>
Are Negative Nominal Interest Rates Expansionary? / 
Gauti B. Eggertsson, Ragnar E. Juelsrud, Ella Getz Wold. 
 - Cambridge, Mass.  National Bureau of Economic Research  2017. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w24039 .
 - Working Paper Series (National Bureau of Economic Research)  no. w24039. .
<br/><br/> November 2017. 
<br/><br/> 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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