The federal reserve is not very constrained by the lower bound on nominal interest rates
I survey the literature on monetary policy at the zero lower bound (ZLB) and effective lower bound (ELB) to make three main points: First, the Federal Reserve’s forward guidance and large-scale asset purchases are effective monetary policy tools at the ZLB/ELB. Second, during the 2008–15 U.S. ZLB pe...
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| Format: | Article |
| Language: | English |
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Brookings Institution Press
2018
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| Online Access: | View Fulltext in Publisher |
| Summary: | I survey the literature on monetary policy at the zero lower bound (ZLB) and effective lower bound (ELB) to make three main points: First, the Federal Reserve’s forward guidance and large-scale asset purchases are effective monetary policy tools at the ZLB/ELB. Second, during the 2008–15 U.S. ZLB period, the Fed was not very constrained in its ability to influence medium-and longer-term interest rates and the economy. And third, the risks of the Fed being significantly constrained by the ELB in the future are typically greatly overstated. I conclude that the Federal Reserve is not very constrained by the lower bound on nominal interest rates. © 2018, Brookings Institution Press. All rights reserved. |
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| ISBN: | 00072303 (ISSN) |
| DOI: | 10.1353/eca.2018.0015 |