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Three Lessons for Monetary Policy in a Low-Inflation Era

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  • Reifschneider, David
  • Willams, John C

Abstract

The zero lower bound on nominal interest rates constrains the central bank's ability to stimulate the economy during downturns. We use the FRB/US model to quantify the effects of the zero bound on macroeconomic stabilization and to explore how policy can be designed to minimize these effects. During particularly severe contractions, open-market operations alone may be insufficient to restore equilibrium; some other stimulus is needed.

Suggested Citation

  • Reifschneider, David & Willams, John C, 2000. "Three Lessons for Monetary Policy in a Low-Inflation Era," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 936-966, November.
  • Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:4:p:936-66
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