Conference Paper
Theoretical analysis regarding a zero lower bound on nominal interest rates
Abstract: This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic stabilizing properties of Taylor rules in a ZLB context. The most important argument, however, is that if the short nominal rate is immobilized at zero, there nevertheless exists a route for monetary stabilization policy to be effective--via the foreign exchange market. Its quantitative importance is examined in a calibrated, optimizing, open-economy model.
Keywords: Monetary policy; Inflation (Finance); Interest rates; Foreign exchange market;
Status: Published in Journal of money, credit and banking, v. 32, no. 4, pt. 2 (November 2000) ; Monetary policy in a low-inflation environment
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Boston
Part of Series: Conference Series ; [Proceedings]
Publication Date: 2000
Pages: 870-935