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An IS-LM analysis of the zero-bound problem

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  • Evan F. Koenig

Abstract

Policy options for stimulating real activity are limited once short-term interest rates have been driven to zero. Monetary policy makers face the difficult challenge of preventing or reversing declines in near-term inflation expectations while preserving confidence in the central bank's commitment to long-term price stability. Fiscal policy makers must commit to a credible plan for maintaining or raising near-term government purchases while minimizing increases in future marginal tax rates.

Suggested Citation

  • Evan F. Koenig, 2011. "An IS-LM analysis of the zero-bound problem," Staff Papers, Federal Reserve Bank of Dallas, issue Apr.
  • Handle: RePEc:fip:feddst:y:2011:i:apr:n:13
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    File URL: http://www.dallasfed.org/assets/documents/research/staff/staff1102.pdf
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    References listed on IDEAS

    as
    1. James Dolmas, 2005. "A fitter, trimmer core inflation measure," Southwest Economy, Federal Reserve Bank of Dallas, issue May, pages 1,4-9.
    2. Koenig, Evan F., 1996. "Targeting nominal income: A closer look," Economics Letters, Elsevier, vol. 51(1), pages 89-93, April.
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    Keywords

    Price levels ; Monetary policy ; Fiscal policy;

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