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Author Bernanke, S. ♦ Vincent ♦ Reinhart, R.
Source CiteSeerX
Content type Text
File Format PDF
Language English
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword American Economic Review ♦ Operating Procedure ♦ Monetary Ease ♦ Short-term Nominal Interest Rate ♦ Low Level ♦ Short-term Policy Rate ♦ Central Bank Balance Sheet ♦ Federal Reserve System ♦ Monetary Policy Work ♦ Conventional Mean ♦ Relative Supply ♦ Short-term Interest Rate ♦ Much Interesting Research ♦ Many Discussion ♦ United State ♦ Turn Affect Economic Decision ♦ Unchanged Level ♦ Short Rate ♦ Monetary Policy ♦ Federal Reserve ♦ Monetary Policy Committee ♦ Numerous Colleague ♦ Communication Strategy ♦ Current Thinking ♦ Financial Asset ♦ Quantitative Easing ♦ Interest Rate ♦ Low Short-term Interest Rate ♦ Discussant Carl Walsh ♦ Recent Year ♦ Policy Rate ♦ Effective Mean ♦ Brief Overview ♦ Central Bank
Description Can monetary policy committees, accustomed to describing their plans and actions in terms of the level of a short-term nominal interest rate, find effective means of conducting and communicating their policies when that rate is zero or close to zero? The very low levels of interest rates in Japan, Switzerland, and the United States in recent years have stimulated much interesting research on this question and have led some central banks to make changes in their operating procedures and communications strategies. In this paper, we will give a brief overview of current thinking on the conduct of monetary policy when short-term interest rates are very low or even zero. 1 Monetary policy works for the most part by influencing the prices and yields of financial assets, which in turn affect economic decisions and thus the evolution of the economy. When the short-term policy rate is at or near zero, the conventional means of effecting monetary ease (lowering the target for the policy rate) is no longer feasible. However, it would be a mistake to think that monetary policy was impotent. We discuss three strategies for stimulating the economy at an unchanged level of the policy rate: these involve (i) providing assurance to investors that short rates will be kept lower in the future than they currently expect, (ii) changing the relative supplies of securities in the marketplace by altering the composition of the central bank’s balance sheet, and (iii) increasing the size of the central bank’s balance sheet beyond the level needed to set the short-term policy rate at zero (“quantitative easing”). We also discuss * Board of Governors of the Federal Reserve System, Washington, DC 20551. We have benefited from the research of, and many discussions with, numerous colleagues, as well as the comments of our discussant Carl Walsh. However, the views expressed here are our own and are not necessarily shared by anyone else in the Federal Reserve
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Learning Resource Type Article
Publisher Institution Papers and Proceedings