Ben Bernanke and the Zero Bound
AbstractFrom 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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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17836.
Date of creation: Feb 2012
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Other versions of this item:
- Laurence Ball, 2012. "Ben Bernanke and the Zero Bound," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 589, The Johns Hopkins University,Department of Economics.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-CBA-2012-02-20 (Central Banking)
- NEP-HPE-2012-02-20 (History & Philosophy of Economics)
- NEP-MAC-2012-02-20 (Macroeconomics)
- NEP-MON-2012-02-20 (Monetary Economics)
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