Alternative Models of Interest Rate Pass-Through in Normal and Negative Territory

No 2020-31, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: In the aftermath of the Great Recession, many countries used low or negative policy rates to stimulate the economy. These policies gave rise to a rapidly growing literature that seeks to understand and quantify their impact. A fundamental step when studying the effectiveness of low and negative policy rates is to understand their transmission to loan and deposit rates. This paper proposes two models of pass-through from policy rates to loan and deposit rates that can match important stylized facts while remaining parsimonious. These models can be used to study the transition between positive and negative policy rates and to quantify the impact of negative rates on banks.

Keywords: Negative Interest Rates; zero lower bound (ZLB); Monetary Policy; Bank Profitability (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 E58 G21 (search for similar items in EconPapers)
Pages: 01-24
Date: 2020-09-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Journal Article: Alternative Models of Interest Rate Pass-Through in Normal and Negative Territory (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:88826

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DOI: 10.24148/wp2020-31

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