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The Risk of Returning to the Zero Lower Bound

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  • Jens H. E. Christensen

Abstract

Following the global financial crisis, U.S. monetary policy was constrained by the zero lower bound for short-term interest rates for many years. It has since lifted off and rates have gradually climbed. However, in light of the continuing economic expansion, it is relevant to ask how likely it is for the lower bound on interest rates to again become a constraint on monetary policy. Analysis using several different approaches suggests that there currently appears to be a low risk of the economy returning to the zero lower bound for at least the next several years.

Suggested Citation

  • Jens H. E. Christensen, 2019. "The Risk of Returning to the Zero Lower Bound," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00194
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    Cited by:

    1. Li, Shaoyu & Zhang, Yuanyuan & Zhu, Chunhui, 2021. "A closed-form exact solution for pricing fixed-income variance swaps with affine-jump model," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

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