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Federal Reserve Bank of Boston
Conference Series ; [Proceedings]
Overcoming the zero bound on interest rate policy
Marvin Goodfriend
Abstract

The paper proposes three options for overcoming the zero bound on interest rate policy: a carry tax on money, open market operations in long bonds, and monetary transfers. A variable carry tax on electronic bank reserves could enable a central bank to target negative nominal interest rates. A carry tax could be imposed on currency to create more leeway to make interest rates negative. Quantitative policy--monetary transfers and open market purchases of long bonds--could stimulate the economy by creating liquidity broadly defined. A central bank needs more fiscal support than usual from the Treasury to pursue quantitative policy at the interest rate floor.


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Marvin Goodfriend, "Overcoming the zero bound on interest rate policy" , Federal Reserve Bank of Boston, Conference Series ; [Proceedings], pages 1007-1057, number y:2000:p:1007-1057, 2000.
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Keywords: Monetary policy ; Interest rates
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