Negative Nominal Interest Rates and the Bank Lending Channel

59 Pages Posted: 7 Jan 2019

See all articles by Gauti B. Eggertsson

Gauti B. Eggertsson

Brown University - Department of Economics

Ragnar Juelsrud

Norges Bank

Larry Summers

Harvard University

Ella Wold

Brown University

Multiple version iconThere are 2 versions of this paper

Date Written: January 2019


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.

Suggested Citation

Eggertsson, Gauti B. and Juelsrud, Ragnar and Summers, Larry and Wold, Ella, Negative Nominal Interest Rates and the Bank Lending Channel (January 2019). NBER Working Paper No. w25416, Available at SSRN:

Gauti B. Eggertsson (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Ragnar Juelsrud

Norges Bank ( email )

Bankplassen 2
Oslo, 0151


Larry Summers

Harvard University ( email )

Ella Wold

Brown University

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