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Ben Bernanke and the Zero Bound

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  • Laurence M. Ball

Abstract

From 2000 to 2003, when Ben Bernanke was a professor and then a Fed Governor, he wrote extensively about monetary policy at the zero bound on interest rates. He advocated aggressive stimulus policies, such as a money-financed tax cut and an inflation target of 3-4%. Yet, since U.S. interest rates hit zero in 2008, the Fed under Chairman Bernanke has taken more cautious actions. This paper asks when and why Bernanke changed his mind about zero-bound policy. The answer, at one level, is that he was influenced by analysis from the Fed staff that was presented at the FOMC meeting of June 2003. This answer raises another question: why did the staff's views influence Bernanke so strongly? I seek answers to this question in the social psychology literature on group decision-making.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17836.

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Date of creation: Feb 2012
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Handle: RePEc:nbr:nberwo:17836

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Cited by:
  1. El-Shagi, Makram & Jung, Alexander, 2013. "Does the Greenspan era provide evidence on leadership in the FOMC?," Working Paper Series, European Central Bank 1579, European Central Bank.
  2. Kazuo Ueda, 2012. "Deleveraging and Monetary Policy: Japan since the 1990s and the United States since 2007," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(3), pages 177-202, Summer.

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