Fed's Effective Lower Bound Constraint on Monetary Policy Created Uncertainty

4 Pages Posted: 7 Nov 2017 Last revised: 13 Jun 2018

Michael Plante

Federal Reserve Bank of Dallas; Indiana University Bloomington - Center for Applied Economics and Policy Research

Alexander Richter

Federal Reserve Bank of Dallas

Nathaniel A. Throckmorton

College of William and Mary

Date Written: 2017

Abstract

Uncertainty about the economy increased when the Fed reduced the federal funds rate to its effective lower bound because the constraint restricted the Fed’s ability to stabilize the economy. As a result, a much stronger negative relationship between uncertainty and economic activity emerged during and shortly after the Great Recession.

Suggested Citation

Plante, Michael and Richter, Alexander and Throckmorton, Nathaniel A., Fed's Effective Lower Bound Constraint on Monetary Policy Created Uncertainty (2017). Economic Letter, Vol. 12, Issue 11, pp. 1-4, 2017. Available at SSRN: https://ssrn.com/abstract=3066689

Michael D. Plante (Contact Author)

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Indiana University Bloomington - Center for Applied Economics and Policy Research ( email )

100 South Woodlawn Avenue, Wylie Hall 250
Bloomington, IN 47405-1704
United States

Alexander Richter

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5360 (Phone)

HOME PAGE: http://alexrichterecon.com

Nathaniel A. Throckmorton

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23187
United States

HOME PAGE: http://nathrockmorton.people.wm.edu/

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