Arbeitspapier
Optimal monetary policy under discretion with a zero bound on nominal interest rates
We determine optimal discretionary monetary policy in a New-Keynesian model when nominal interest rates are bounded below by zero. Nominal interest rates should be lowered faster in response to adverse shocks than in the case without bound. Such ‘preemptive easing’ is optimal because expectations of a possibly binding bound in the future amplify the effects of adverse shocks. Calibrating the model to the U.S. economy we ?nd the easing effect to be quantitatively important. Moreover, signi?cant welfare losses. Losses increase further when in?ation is partly determined by lagged in?ation in the Phillips curve. Targeting positive in?ation rates reduces the frequency of a binding lower bound, but tends to reduce welfare compared to a target rate of zero. The welfare gains from policy commitment, however, appear signi?cant and are much larger than in the case without lower bound.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 380
- Klassifikation
-
Wirtschaft
Computational Techniques; Simulation Modeling
Price Level; Inflation; Deflation
Monetary Policy
- Thema
-
liquidity trap
nonlinear policy
zero lower bound
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Adam, Klaus
Billi, Roberto M.
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2004
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 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.
- European Central Bank (ECB)
Entstanden
- 2004
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