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Journal Article
How Likely Is the Zero Lower Bound?
Matthes, Christian; Lubik, Thomas A. (2019)
We estimate the probability that the federal funds rate will be at or below the zero lower bound over a ten-year time horizon. We do so by specifying and estimating a time-varying parameter vector autoregressive model for key US macroeconomic aggregates. Based on the estimated model, we generate a distribution of future outcomes from which we compute such probabilities. We find that the zero lower bound probability ranges between 15 percent and 30 percent in the longer term depending on the specific measure used. In the near term, this probability is effectively zero. Robustness checks for ...
Economic Quarterly , Issue 1Q , Pages 41-54

Speech
Comments on “A Skeptical View of the Impact of the Fed’s Balance Sheet”: remarks at the 2018 U.S. Monetary Policy Forum, New York City
Dudley, William (2018-02-23)
Remarks at the 2018 U.S. Monetary Policy Forum, New York City.
Speech , Paper 275

Speech
Implementing monetary policy with the balance sheet: keynote remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany
Potter, Simon M. (2017-11-06)
Keynote Remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany.
Speech , Paper 259

Speech
Research, Policy, and the Zero Lower Bound
Williams, John C. (2020-03-06)
Remarks at Shadow Open Market Committee Spring Meeting, New York City.
Speech

Report
The inflation-output trade-off revisited
Eggertsson, Gauti B.; Giannoni, Marc (2013-03-01)
A rich literature from the 1970s shows that as inflation expectations become more and more ingrained, monetary policy loses its stimulative effect. In the extreme, with perfectly anticipated inflation, there is no trade-off between inflation and output. A recent literature on the interest-rate zero lower bound, however, suggests there may be some benefits from anticipated inflation when he economy is in a liquidity trap. In this paper, we reconcile these two views by showing that while it is true, at positive interest rates, that inflation loses its stimulative effects as it becomes better ...
Staff Reports , Paper 608

Report
An interest rate rule to uniquely implement the optimal equilibrium in a liquidity trap
Zabai, Anna; Duarte, Fernando M. (2015-10-01)
We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a canonical New Keynesian model in which the zero lower bound on nominal interest rates (ZLB) is binding. The rule commits to zero nominal interest rates for a length of time that increases in proportion to how much past inflation has deviated?either upward or downward?from its optimal level. Once outside the ZLB, interest rates follow a standard Taylor rule. Following the Taylor principle outside the ZLB is neither necessary nor sufficient to ensure uniqueness of equilibria. ...
Staff Reports , Paper 745

Report
The great escape? A quantitative evaluation of the Fed’s liquidity facilities
Del Negro, Marco; Eggertsson, Gauti B.; Ferrero, Andrea; Kiyotaki, Nobuhiro (2011)
We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 U.S. financial crisis? Once the nominal interest rate reaches the zero bound, what are the effects of interventions in which the government provides liquidity in exchange for illiquid private paper? We find that the effects of the liquidity shock can be large, and we show some numerical examples in which the liquidity facilities ...
Staff Reports , Paper 520

Report
What to expect from the lower bound on interest rates: evidence from derivatives prices
Mertens, Thomas M.; Williams, John C. (2018-08-01)
This paper analyzes the effects of the lower bound for interest rates on the distributions of inflation and interest rates. We study a stylized New Keynesian model where the policy instrument is subject to a lower bound to motivate the empirical analysis. Two equilibria emerge: In the “target equilibrium,” policy is unconstrained most or all of the time, whereas in the “liquidity trap equilibrium,” policy is mostly or always constrained. We use options data on future interest rates and inflation to study whether the decrease in the natural real rate of interest leads to forecast ...
Staff Reports , Paper 865

Report
Monetary policy frameworks and the effective lower bound on interest rates
Mertens, Thomas M.; Williams, John C. (2019-01-01)
This paper applies a standard New Keynesian model to analyze the effects of monetary policy in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will become anchored at a level below the inflation target, which in turn exacerbates the deleterious effects of the lower bound on the economy. Two key themes emerge from our analysis. First, the central bank can mitigate this problem of a downward bias in inflation expectations by following an average-inflation targeting framework that aims for ...
Staff Reports , Paper 877

Speech
Panel remarks at the Brookings Institution
Dudley, William (2015-10-15)
Remarks at The Fed at a crossroads: Where to go next?, Brookings Institution, Washington, D.C.
Speech , Paper 181

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