This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Zero Bound on Interest Rates and Optimal Monetary Policy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Gauti B. Eggertsson (International Monetary Fund)
Michael Woodford (Princeton University)

Additional information is available for the following registered author(s):

Abstract

This paper considers the consequences for monetary policy of the zero floor for nominal interest rates. The zero bound can be a significant constraint on the ability of a central bank to combat deflation. The paper shows, in the context of an intertemporal equilibrium model, that open-market operations, even of "unconventional" types, are ineffective if future policy is expected to be purely forward looking. However, a credible commitment to the right sort of history-dependent policy can largely mitigate the distortions created by the zero bound. In the model, optimal policy involves a commitment to adjust interest rates so as to achieve a time-varying price-level target, when this is consistent with the zero bound. The paper also discusses ways in which other central bank actions, although irrelevant apart from their effects on expectations, may help to make a central bank's commitment to its target more credible.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.brookings.edu/press/Books/2003/bpea20031.aspx
File Format: text/html
File Function:
Download Restriction: no

Publisher Info
Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 34 (2003)
Issue (Month): 2003-1 ()
Pages: 139-235
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:bin:bpeajo:v:34:y:2003:i:2003-1:p:139-235

Contact details of provider:
Postal: 1775 Massachusetts Ave NW, Washington DC 20036
Phone: (202) 797-6000
Fax: (202) 797-6004
Email:
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Lindsey Wilson).

Related research
Keywords: macroeconomics Zero Bound Interest Rates Optimal Monetary Policy

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? LogEc provides statistical analysis about downloads from this service (and others).

This page was last updated on 2008-8-13.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.