Arbeitspapier
Discretionary monetary policy and the zero lower bound on nominal interest rates
Ignoring the existence of the zero lower bound on nominal interest rates one considerably understates the value of monetary commitment in New Keynesian models. A stochastic forward-looking model with lower bound, calibrated to the U.S. economy, suggests that low values for the natural rate of interest lead to sizeable output losses and deflation under discretionary monetary policy. The fall in output and deflation are much larger than in the case with policy commitment and do not show up at all if the model abstracts from the existence of the lower bound. The welfare losses of discretionary policy increase even further when inflation is partly determined by lagged inflation in the Phillips curve. These results emerge because private sector expectations and the discretionary policy response to these expectations reinforce each other and cause the lower bound to be reached much earlier than under commitment.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 2005/16
- Klassifikation
-
Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
- Thema
-
Nonlinear Optimal Policy
Occasionally Binding Constraint
Sequential Policy
Markov Perfect Equilibrium
Liquidity Trap
Geldpolitik
Diskretionäre Politik
Phillips-Kurve
Liquiditätspräferenz
Zinspolitik
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Adam, Klaus
Billi, Roberto M.
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2005
- Handle
- URN
-
urn:nbn:de:hebis:30-10925
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Adam, Klaus
- Billi, Roberto M.
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2005
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