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Zero Lower Bound: Is it a Problem in the Euro Area?

26 Pages Posted: 26 Jan 2004  

Günter Coenen

European Central Bank (ECB)

Date Written: September 2003

Abstract

This paper presents the results of a quantitative study of the implications of the zero lower bound on nominal interest rates which was undertaken in the context of the review of the ECB's monetary policy strategy in Spring 2003. Focusing on the euro area, the paper provides an assessment of the likelihood that the short-term nominal interest rate may be constrained at zero and quantifies how the zero-bound constraint may affect the dynamic behaviour of key macroeconomic variables such as the shortterm nominal interest rate, annual inflation and output.

Keywords: zero-interest-rate bound, price stability, nominal rigidities, interest rate rules, euro area

Keywords: Zero-interest-rate bound, price stability, nominal rigidities, interest rate

JEL Classification: E31, E52, E58, E61

Suggested Citation

Coenen, Günter, Zero Lower Bound: Is it a Problem in the Euro Area? (September 2003). ECB Working Paper No. 269. Available at SSRN: https://ssrn.com/abstract=457537

Günter Coenen (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7887 (Phone)
+49 69 1344 6575 (Fax)

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