Data and code for: "The Reversal Interest Rate"
Principal Investigator(s): View help for Principal Investigator(s) Joseph Abadi, Federal Reserve Bank of Philadelphia; Markus Brunnermeier, Princeton University; Yann Koby, Brown University
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
|---|---|---|---|
| apx_C | 04/19/2023 09:55:AM | ||
| discussion | 04/19/2023 09:56:AM | ||
| forward_guidance | 04/19/2023 09:57:AM | ||
| main_results | 04/19/2023 09:57:AM | ||
| robustness | 04/19/2023 09:58:AM | ||
| sensitivity_analysis | 04/19/2023 09:58:AM | ||
| theory | 04/11/2023 02:05:PM | ||
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application/pdf | 161.8 KB | 06/01/2023 10:13:AM |
Project Citation:
Abadi, Joseph, Brunnermeier, Markus, and Koby, Yann. Data and code for: “The Reversal Interest Rate.” Nashville, TN: American Economic Association [publisher], 2023. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-07-18. https://doi.org/10.3886/E188611V1
Project Description
Summary:
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The reversal interest rate is the rate at which accommodative monetary policy reverses and becomes contractionary for lending. We theoretically demonstrate its existence in a macroeconomic model featuring imperfectly competitive banks that face financial frictions. When interest rates are cut too low, further monetary stimulus cuts into banks’ profit margins, depressing their net worth and curtailing their credit supply. Similarly, when interest rates are low for too long, the persistent drag on bank profitability eventually outweighs banks’ initial capital gains, also stifling credit supply. We quantify the importance of this mechanism within a calibrated New Keynesian model.
Scope of Project
Subject Terms:
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monetary policy;
banking;
zero lower bound;
negative interest rates
JEL Classification:
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E43 Interest Rates: Determination, Term Structure, and Effects
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
E43 Interest Rates: Determination, Term Structure, and Effects
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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