Monetary Policy Accommodation at the Lower Bound
11 Pages Posted: 2 May 2017
Date Written: February 24, 2017
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: Suggested Citation