Monetary Policy Alternatives At The Zero Bound

Author : Ben Bernanke,Vincent Reinhart,Brian P. Sack
Publisher : Unknown
Page : 134 pages
File Size : 40,5 Mb
Release : 2004
Category : Deflation (Finance)
ISBN : CORNELL:31924099138038

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Monetary Policy Alternatives at the Zero Bound by Ben Bernanke,Vincent Reinhart,Brian P. Sack Pdf

"The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on "non-standard" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate "noarbitrage" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset"--Abstract.

Author : Ben S Bernanke,Vincent R Reinhart,Brian P Sack
Publisher : Unknown
Page : 128 pages
File Size : 48,8 Mb
Release : 2006-03-01
Category : Electronic
ISBN : 0815708939

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Monetary Policy Alternatives at the Zero Bound by Ben S Bernanke,Vincent R Reinhart,Brian P Sack Pdf

The success of central banks at reducing inflation through lowering interest rates has increased the likelihood that rates could bottom out at zero during a recession. Ben Bernanke--"the nominee to replace Alan Greenspan as Fed Chairman--"and his coauthors look at the effectiveness of unconventional measures available to monetary policymakers "at the zero bound."

Author : Ruchir Agarwal,Miles Kimball
Publisher : International Monetary Fund
Page : 40 pages
File Size : 48,5 Mb
Release : 2015-10-23
Category : Business & Economics
ISBN : 9781513567327

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Breaking Through the Zero Lower Bound by Ruchir Agarwal,Miles Kimball Pdf

There has been much discussion about eliminating the “zero lower bound” by eliminating paper currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression—when countries were able to revive their economies by going off the gold standard—all that is needed to empower monetary policy to cut interest rates as much as needed for economic stimulus now is to change from a paper standard to an electronic money standard, and to be willing to have paper currency go away from par. This paper develops the idea further and shows how such a mechanism can be implemented in a minimalist way by using a time-varying paper currency deposit fee between private banks and the central bank. This allows the central bank to create a crawling-peg exchange rate between paper currency and electronic money; the paper currency interest rate can be either lowered below zero or raised above zero. Such an ability to vary the paper currency interest rate along with other key interest rates, makes it possible to stimulate investment and net exports as much as needed to revive the economy, even when inflation, interest rates, and economic activity are quite low, as they are currently in many countries. The paper also examines different options available to the central bank to return to par when negative interest rates are no longer needed, and the associated implications for the financial sector and debt contracts. Finally, the paper discusses various legal, political, and economic challenges of putting in place such a framework and how policymakers could address them.

Author : Lars Protze
Publisher : Diplomica Verlag
Page : 185 pages
File Size : 47,6 Mb
Release : 2008-08
Category : Business & Economics
ISBN : 9783836664905

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Zero Lower Bound and Monetary Policy in the Euro Area by Lars Protze Pdf

Central banks around the world try to influence economic activity by altering nominal interest rates which will have an effect on the real rate. However, this is only possible as long as interest rates are above zero. The case of Japan showed that monetary policy was helpless as nominal rates approached zero. This Book starts with an overview of monetary policy with the restriction that interest rates can not fall below zero. Then optimal monetary policy in a low inflation environment is treated. This is done by using a New Keynesian model with sticky prices. Therefore the model and the necessary optimality conditions will be derived (this will be done extensively in the appendix). After deriving the optimality conditions it will be shown how optimal monetary policy will be conducted. To evaluate the outcome of monetary policy a welfare function will be derived. It will be shown how the welfare function to evaluate the outcome of monetary policy is derived from the utility function of the household. As a result it will be shown that a price level target is welfare maximizing although most central banks nowadays use an inflation target instead. Reasons for an inflation target will be shown in the discussion of the model. The second part of the book describes the inflation dynamics in the euro area to see what monetary authority shall do to prevent the economy from falling into the vicious circle of deflation. Two wage contracting models that describe inflation dynamics in the euro area reasonably well will be explained, the Fuhrer-Moore und the Taylor contracting. After showing the optimal policy it will be discussed how severe the zero bound in the euro area is and what policy alternatives are left when monetary policy is restricted. Finally the results obtained will be discussed to see the pitfalls of price level targeting. The large appendix provides the complete derivation of the model and the optimality conditions.

Author : Payton E. Dawson,Dennis A. West
Publisher : Nova Science Publishers
Page : 0 pages
File Size : 53,6 Mb
Release : 2013
Category : Monetary policy
ISBN : 1626186375

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Unconventional Monetary Policy and the Federal Reserve by Payton E. Dawson,Dennis A. West Pdf

The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to re-evaluate its monetary policy. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfil its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. This book analyses the economic effects of these programs, the current economic context in which these policies have been adopted, policy alternatives that the Fed has not pursued to date and their potential effects, potential legislative options for restricting the Fed's pursuit of unconventional monetary policy, and issues surrounding the eventual "exit strategy" from unconventional policy.

Author : Anonim
Publisher : DIANE Publishing
Page : 64 pages
File Size : 54,9 Mb
Release : 2024-06-28
Category : Electronic
ISBN : 9781437985290

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Monetary Policy and the Housing Bubble by Anonim Pdf

Author : John H. Cochrane,John B. Taylor
Publisher : Hoover Press
Page : 237 pages
File Size : 43,5 Mb
Release : 2020-05-01
Category : Business & Economics
ISBN : 9780817923761

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Strategies for Monetary Policy by John H. Cochrane,John B. Taylor Pdf

As the Federal Reserve System conducts its latest review of the strategies, tools, and communication practices it deploys to pursue its dual-mandate goals of maximum employment and price stability, Strategies for Monetary Policy—drawn from the 2019 Monetary Policy Conference at the Hoover Institution—emerges as an especially timely volume. The book's expert contributors examine key policy issues, offering their perspectives on US monetary policy tools and instruments and the interaction between Fed policies and financial markets. The contributors review central bank inflation-targeting policies, how various monetary strategies actually work in practice, and the use of nominal GDP targeting as a way to get the credit market to work well and fix the friction in that market. In addition, they discuss the effects of the various rules that the Fed considers in setting policy, how the Fed's excessive fine-tuning of the economy and financial markets has added financial market volatility and harmed economic performance, and the key issues that impact achievement of the Fed's 2 percent inflation objective. The volume concludes by exploring potential options for enhancing our policy approach.

Author : Marc LaBonte,Congressional Research Service
Publisher : Unknown
Page : 0 pages
File Size : 40,8 Mb
Release : 2015-10-18
Category : Electronic
ISBN : 1329630181

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Federal Reserve by Marc LaBonte,Congressional Research Service Pdf

The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to expand its monetary policy tools. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfill its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. The Fed has made large-scale asset purchases, popularly referred to as "quantitative easing" (QE), that have increased the size of its balance sheet from $0.9 trillion in 2007 to about $4 trillion at the end of 2013. In September 2012, the Fed began a third round of monthly purchases of Treasury securities and mortgage-backed securities (MBS), referred to as "quantitative easing three" or QEIII.

Author : Michael Bordo,John Cochrane,Amit Seru
Publisher : Hoover Press
Page : 200 pages
File Size : 45,5 Mb
Release : 2018-03-01
Category : Business & Economics
ISBN : 9780817921361

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Structural Foundations of Monetary Policy by Michael Bordo,John Cochrane,Amit Seru Pdf

In The Structural Foundations of Monetary Policy, Michael D. Bordo, John H. Cochrane, and Amit Seru bring together discussions and presentations from the Hoover Institution's annual monetary policy conference. The conference participants discuss long-run monetary issues facing the world economy, with an emphasis on deep, unresolved structural questions. They explore vital issues affecting the Federal Reserve, the United States' central bank. They voice concern over the Fed's independence, governance, and ability to withstand future shocks and analyze the effects of its monetary policies and growing balance sheet in the wake of the 2008 financial crisis. The authors ask a range of questions that get to the heart of twenty-first-century monetary policy. Finally they propose reforms to ensure that the Fed will remain independent, stable, strong, and resilient in an unpredictable world.

Author : Takatoshi Ito,Andrew K. Rose
Publisher : University of Chicago Press
Page : 427 pages
File Size : 46,8 Mb
Release : 2007-11-01
Category : Business & Economics
ISBN : 9780226379012

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Monetary Policy with Very Low Inflation in the Pacific Rim by Takatoshi Ito,Andrew K. Rose Pdf

Extremely low inflation rates have moved to the forefront of monetary policy discussions. In Asia, a number of countries—most prominently Japan, but also Taiwan and China—have actually experienced deflation over the last fifteen years. Monetary Policy with Very Low Inflation in the Pacific Rim explores the factors that have contributed to these circumstances and forecasts some of the potential challenges faced by these nations, as well as some potential solutions. The editors of this volume attribute low inflation and deflation in the region to a number of recent phenomena. Some of these episodes, they argue, may be linked to rapid growth on the supply side of economies. Here, inadequate demand policy can produce what is referred to as a "liquidity trap" in which the expectation of falling prices encourages agents to defer costly purchases, thereby discouraging growth. Low inflation rates can also be traced to the presence of a "zero-lower bound" on interest rates, as well as the inflation-targeting phenomenon. Targets have been set so low, the editors argue, that in some cases a few bad shocks lead to deflation.

Author : Martin Bodenstein
Publisher : DIANE Publishing
Page : 47 pages
File Size : 40,5 Mb
Release : 2011-04
Category : Reference
ISBN : 9781437980509

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Oil Shocks and the Zero Bound on Nominal Interest Rates by Martin Bodenstein Pdf

Beginning in 2009, in many advanced economies, policy rates reached their zero lower bound (ZLB). Almost at the same time, oil prices started rising again. The authors analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates theinterest-sensitive component of GDP, offsetting the usual contractionary effects. In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion. Illus. This is a print on demand report.

Author : Board of Governors of the Federal Reserve System
Publisher : Unknown
Page : 0 pages
File Size : 55,5 Mb
Release : 2002
Category : Banks and Banking
ISBN : 0894991965

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The Federal Reserve System Purposes and Functions by Board of Governors of the Federal Reserve System Pdf

Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.

Author : Margherita Bottero,Ms.Camelia Minoiu,José-Luis Peydro,Andrea Polo,Mr.Andrea F Presbitero,Enrico Sette
Publisher : International Monetary Fund
Page : 59 pages
File Size : 48,5 Mb
Release : 2019-02-28
Category : Business & Economics
ISBN : 9781498300858

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Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data by Margherita Bottero,Ms.Camelia Minoiu,José-Luis Peydro,Andrea Polo,Mr.Andrea F Presbitero,Enrico Sette Pdf

We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Author : Margaux MacDonald,Michal Ksawery Popiel
Publisher : International Monetary Fund
Page : 70 pages
File Size : 45,8 Mb
Release : 2017-12-01
Category : Business & Economics
ISBN : 9781484330944

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Unconventional Monetary Policy in a Small Open Economy by Margaux MacDonald,Michal Ksawery Popiel Pdf

This paper investigates the effects of unconventional monetary policy in a small open economy. Using recently proposed shadow interest rates to capture unconventional monetary policy at the zero lower bound (ZLB) we estimate a Bayesian structural vector autoregressive model for Canada - a useful case where foreign shocks can be proxied by U.S. variables alone. We find that, during the ZLB period, Canadian unconventional monetary policy increased output (measured by industrial production) by 0.013 percent per month on average while US unconventional monetary policy raised Canadian output by 0.127 percent per month on average. Our results demonstrate the effectiveness of domestic unconventional monetary policy and the strong positive spillover effects that foreign unconventional monetary policies can have in a small open economy.

Author : Payton E. Dawson,Dennis A. West
Publisher : Unknown
Page : 163 pages
File Size : 48,7 Mb
Release : 2013
Category : Business & Economics
ISBN : 1626186383

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Unconventional Monetary Policy and the Federal Reserve by Payton E. Dawson,Dennis A. West Pdf

The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to reevaluate its monetary policy. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfill its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. This book analyzes the economic effects of these programs, the current economic context in which these policies have been adopted, policy alternatives that the Fed has not pursued to date and their potential effects, potential legislative options for restricting the Fed's pursuit of unconventional monetary policy, and issues surrounding the eventual "exit strategy" from unconventional policy.