Heeding Daedalus : Optimal Inflation and the Zero Lower Bound

@inproceedings{Williams1999HeedingD,
  title={Heeding Daedalus : Optimal Inflation and the Zero Lower Bound},
  author={John C. Williams},
  year={1999}
}
This paper reexamines the implications of the zero lower bound on interest rates for monetary policy and the optimal choice of steady-state inflation in light of the experience of the recent global recession. There are two main findings. First, the zero lower bound did not materially contribute to the sharp declines in output in the United States and many other economies through the end of 2008, but it is a significant factor slowing recovery. Model simulations imply that an additional 4… CONTINUE READING
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