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

2020-31 | September 24, 2020

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.

Article Citation

Ulate, Mauricio. 2020. “Alternative Models of Interest Rate Pass-Through in Normal and Negative Territory,” Federal Reserve Bank of San Francisco Working Paper 2020-31. Available at

About the Author
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Mauricio Ulate is a senior economist in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Mauricio Ulate