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Federal Reserve Bank of Dallas
Economic Letter
Fed’s Effective Lower Bound Constraint on Monetary Policy Created Uncertainty
Michael D. Plante
Alexander W. Richter
Nathaniel Throckmorton
Abstract

Uncertainty about the economy increased when the Fed reduced the federal funds rate to its effective lower bound because the constraint restricted the Fed’s ability to stabilize the economy. As a result, a much stronger negative relationship between uncertainty and economic activity emerged during and shortly after the Great Recession.


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Michael D. Plante & Alexander W. Richter & Nathaniel Throckmorton, "Fed’s Effective Lower Bound Constraint on Monetary Policy Created Uncertainty" , Federal Reserve Bank of Dallas, Economic Letter, volume 12, issue 11, pages 1-4, November 2017.
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