Joint research unit 7235

Monetary Policy Transmission with Downward Interest Rate Rigidity

Grégory Levieuge, Jean-Guillaume Sahuc

Empirical evidence suggests that the pass-through from policy to retail bank rates is asymmetric in the euro area. Bank lending rates adjust more slowly and less completely to Eonia decreases than to increases. We investigate how this downward interest rate rigidity affects the response of the economy to monetary policy shocks. To this end, we introduce asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. We find that the initial response of GDP to a negative monetary policy shock is 25% lower than its response to a positive shock of similar amplitude. This implies that a central bank would have to decrease its policy rate by 50% to 75% more to obtain a medium-run impact on GDP that would be symmetric to the impact of the positive shock. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions.

AGENDA

Tuesday 31 January 2023

Recherche et Economie et Socioéconomie Politique, des Institutions et des Régulations (RESPIR)

Nathalie Heinich (EHESS)

ANNULÉ ET REPORTÉ À UNE DATE ULTÉRIEURE

Valeur et mesure: aux limites de l’approche économique

Tuesday 31 January 2023

Valeur et mesure: aux limites de l’approche économique

Nathalie Heinich (EHESS)

ANNULÉ ET REPORTÉ À UNE DATE ULTÉRIEURE

Valeur et mesure: aux limites de l’approche économique

Tuesday 31 January 2023

Series of Webinars on Economics of Environment, Energy and Transport (SWEEET)

Aurelien Saussay(OFCE, Sciences Po, Paris), Misato Sato, (London School of Economics and Political Science) Francesco Vona (University of Milan) Layla O’Kane(Lightcast)

En visio

Who’s fit for the low-carbon transition? Emerging skills and wage gaps in job ad data

Tuesday 31 January 2023

Who’s fit for the low-carbon transition? Emerging skills and wage gaps in job ad data

Aurelien Saussay(OFCE, Sciences Po, Paris), Misato Sato, (London School of Economics and Political Science) Francesco Vona (University of Milan) Layla O’Kane(Lightcast)

En visio

Who’s fit for the low-carbon transition? Emerging skills and wage gaps in job ad data

Thursday 2 February 2023

Nouveaux doctorants

Nabil Daher, Michaël Guilloussou, Daniela Lima Rente, Maryam Soltani

Nouveaux doctorants

Thursday 2 February 2023

Lunch

Nabil Daher, Michaël Guilloussou, Daniela Lima Rente, Maryam Soltani

Nouveaux doctorants

Thursday 2 February 2023

Groupe de travail Economie Comportementale

Carole Treibich (Laboratoire d'Economie Appliquée de Grenoble GAEL)

Salle 101

Disentangling peer effects in transportation mode choice: the example of active commuting

Thursday 2 February 2023

Disentangling peer effects in transportation mode choice: the example of active commuting

Carole Treibich (Laboratoire d'Economie Appliquée de Grenoble GAEL)

Salle 101

Disentangling peer effects in transportation mode choice: the example of active commuting

Inscription aux Newsletters

Newsletter subscription