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Monetary Policy after Bubbles Burst: The Zero Lower Bound, the Liquidity Trap and the Credit Deadlock


  • David Laidler


The current widespread use of models of monetary policy that link expenditure to interest rates, while by-passing interaction of the supply and demand for money in the transmission mechanism, fails to illuminate several important policy issues, and is beginning to create a professional "memory loss" in some of these areas. This claim is illustrated with reference to recent discussions of the conduct of monetary policy in the wake of financial crises, particularly when short interest rates are close to zero, as they have recently been in Japan.

Suggested Citation

  • David Laidler, 2004. "Monetary Policy after Bubbles Burst: The Zero Lower Bound, the Liquidity Trap and the Credit Deadlock," Canadian Public Policy, University of Toronto Press, vol. 30(3), pages 333-340, September.
  • Handle: RePEc:cpp:issued:v:30:y:2004:i:3:p:333-340

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    References listed on IDEAS

    1. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
    2. David E. Laidler, 1988. "Taking Money Seriously," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 687-713, November.
    3. Lars E.O. Svensson, 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 145-166, Fall.
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    Cited by:

    1. repec:eee:jmacro:v:54:y:2017:i:pa:p:42-58 is not listed on IDEAS
    2. Belongia, Michael T. & Ireland, Peter N., 2017. "Circumventing the zero lower bound with monetary policy rules based on money," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 42-58.
    3. Michael Belongia, 2007. "Opaque rather than transparent: Why the public cannot monitor monetary policy," Public Choice, Springer, vol. 133(3), pages 259-267, December.
    4. David Laidler, 2007. "Successes and Failures of Monetary Policy Since the 1950s," University of Western Ontario, Economic Policy Research Institute Working Papers 20072, University of Western Ontario, Economic Policy Research Institute.
    5. David Laidler, 2012. "Money Still Talks - Is Anyone Listening?," e-briefs 133, C.D. Howe Institute.

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