Fed's Effective Lower Bound Constraint on Monetary Policy Created Uncertainty
4 Pages Posted: 7 Nov 2017 Last revised: 13 Jun 2018
Date Written: 2017
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.
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