Three Lessons for Monetary Policy in a Low Inflation Era

@article{Reifschneider1999ThreeLF,
  title={Three Lessons for Monetary Policy in a Low Inflation Era},
  author={D. Reifschneider and John C. Williams},
  journal={Monetary Economics},
  year={1999}
}
The zero lower bound on nominal interest rates constrains the central bank's ability to stimulate the economy during downturns. We use the FRB/US model to quantify the effects of the bound on macroeconomic stabilization and to explore how policy can be designed to minimize these effects. During particularly severe contractions, open-market operations alone may be insufficient to restore equilibrium; some other stimulus is needed. Abstracting from such rare events, if policy follows the Taylor… Expand
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