Monetary Policy Accommodation at the Lower Bound

11 Pages Posted: 2 May 2017

See all articles by Signe Krogstrup

Signe Krogstrup

National Bank of Denmark - Economics Department; Danmarks Nationalbank (The Central Bank of Denmark); IMF

Date Written: February 24, 2017

Abstract

Monetary policy was too tight in many countries following the financial crisis, due to the lower bound on interest rates. This is likely to have prolonged the recession that followed. This point is illustrated with an assessment of monetary accommodation in the US since the financial crisis, and the accommodation achieved through negative interest rates in countries that have adopted these. The lower bound will likely give rise to considerable economic costs in the future, as it has in the recent past. There is an urgent need to consider how policy tools and frameworks should be adapted.

Keywords: Inflation Expectations, Neutral Real Interest Rates, Taylor Rule, Negative Interest Rates

JEL Classification: E43, E52

Suggested Citation

Krogstrup, Signe, Monetary Policy Accommodation at the Lower Bound (February 24, 2017). Available at SSRN: https://ssrn.com/abstract=2961413 or http://dx.doi.org/10.2139/ssrn.2961413

Signe Krogstrup (Contact Author)

National Bank of Denmark - Economics Department ( email )

1093 Copenhagen
Denmark

Danmarks Nationalbank (The Central Bank of Denmark) ( email )

Havnegade 5
Copenhagen, 1093
Denmark

IMF ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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