Going Negative at the Zero Lower Bound: The Effects of Negative Nominal Interest Rates

After the Great Recession several central banks started setting negative nominal interest rates in an expansionary attempt, but effectiveness of this measure remains unclear. Negative can stimulate economy by lowering that commercial charge on loans, they also erode bank profitability squeezing deposit spreads. This paper studies effects a new DSGE model where intermediate transmission monetary policy. I use bank-level data to calibrate and find policy territory is between 60 90 percent as effective positive territory. (JEL E12, E32, E43, E52, E58, G21)