Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates / Bennett T. McCallum.

Format:

Book

Author/Creator:

McCallum, Bennett T.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7677.

NBER working paper series no. w7677

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic stabilizing properties of Taylor rules in a ZLB context. The most important argument, however, is that if the short nominal rate is immobilized at zero, there nevertheless exists a route for monetary stabilization policy to be effective--- via the foreign exchange market. Its quantitative importance is examined in a calibrated, optimizing, open-economy model.

Notes:

Print version record

April 2000.