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How Much Could Negative Rates Have Helped the Recovery?

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Abstract

The Federal Reserve dropped the federal funds rate to near zero during the Great Recession to bolster the U.S. economy. Allowing the federal funds rate to drop below zero may have reduced the depth of the recession and enabled the economy to return more quickly to its full potential. It also may have allowed inflation to rise faster toward the Fed?s 2% target. In other words, negative interest rates may be a useful tool to promote the Fed?s dual mandate.

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  • Vasco Curdia, 2019. "How Much Could Negative Rates Have Helped the Recovery?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00184
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    1. Jens H. E. Christensen & Glenn D. Rudebusch, 2012. "The Response of Interest Rates to US and UK Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages 385-414, November.
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