English, Article edition: Misconceptions Regarding the Zero Lower Bound on Interest Rates Keynote Speech by Bennett T. McCallum

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Misconceptions Regarding the Zero Lower Bound on Interest Rates
Author
  • Keynote Speech by Bennett T. McCallum
Physical Description
  • article
Notes
  • The paper reviews issues related to the zero lower bound (ZLB) on interest rates and argues that all of the following propositions are invalid: (1) in a ZLB situation, gshaping interest rate expectations is essentially the only tool that central bankers haveh (Bernanke, Reinhart, and Sack [2004]); (2) fiscal policy actions such as ghelicopter dropsh are in theory more effective than monetary policy actions; (3) the prominent gfoolproof wayh policy rule of Svensson (2001, 2003) is applicable more generally?that is, even when exact uncovered interest parity holds?than the alternative exchange rate rule of McCallum (2000); (4) both of the exchange rate strategies described in (3) are open to the objection that they constitute gbeggar-thy-neighborh approaches; and (5) there is a significant danger of ZLB difficulties stemming from a g deflationary traph type of equilibrium, as distinct from a gliquidity trap.h
  • Interest rates; Zero lower bound; Quantitative easing; Expectations; Deflation trap; Liquidity trap
  • RePEc:ime:imemes:v:24:y:december:i:s1:p:13-26
Language
  • English
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