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Journal articles on the topic 'Zero-bound interest rates'

Author: Grafiati

Published: 4 June 2021

Last updated: 6 February 2022

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1

Klose, Jens. "Exchange rate movements in the presence of the zero lower bound." Banks and Bank Systems 12, no. 1 (March 24, 2017): 82–87. http://dx.doi.org/10.21511/bbs.12(1).2017.10.

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Exchange rates are expected to adjust according to the stance of monetary policies, which are in normal times differences in interest rates set by the central banks. This interest rate parity does, however, no longer hold if central banks approach the zero lower bound on interest rates and switch to measures of quantitative easing. Therefore, the author estimates exchange rate changes based on the different stance of the monetary base, which is an indicator of differing monetary policies in the countries. The results reveal that indeed exchange rates movements in the Dollar-Euro-Rate can be explained by differences in the monetary base, since the zero lower bound has become binding. However, the influence depends crucially on whether the monetary base is increased or decreased and whether the other central bank is also expanding or reducing its balance sheet at the same time. Keywords: monetary base, exchange rate, Fed, ECB. JEL Classification: E52, E58, F42

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2

Williamson, Stephen D. "Low real interest rates and the zero lower bound." Review of Economic Dynamics 31 (January 2019): 36–62. http://dx.doi.org/10.1016/j.red.2018.12.003.

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3

Eggertsson, Gauti B., and Michael, Professor Woodford. "Zero Bound on Interest Rates and Optimal Monetary Policy." Brookings Papers on Economic Activity 2003, no. 1 (2003): 139–233. http://dx.doi.org/10.1353/eca.2003.0010.

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4

Bodenstein, Martin, Luca Guerrieri, and Christopher J. Gust. "Oil Shocks and the Zero Bound on Nominal Interest Rates." International Finance Discussion Paper 2010, no. 1009 (September 2010): 1–47. http://dx.doi.org/10.17016/ifdp.2010.1009.

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5

Fendel, Ralf, and Michael Frenkel. "Deflation and the zero lower bound on nominal interest rates." Financial Markets and Portfolio Management 18, no. 2 (June 2004): 160–81. http://dx.doi.org/10.1007/s11408-004-0204-z.

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6

Jarrow, Robert A. "The zero-lower bound on interest rates: Myth or reality?" Finance Research Letters 10, no. 4 (December 2013): 151–56. http://dx.doi.org/10.1016/j.frl.2013.08.003.

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7

Wolman, Alexander L. "Real Implications of the Zero Bound on Nominal Interest Rates." Journal of Money, Credit, and Banking 37, no. 2 (2005): 273–96. http://dx.doi.org/10.1353/mcb.2005.0026.

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8

Bodenstein, Martin, Luca Guerrieri, and Christopher J. Gust. "Oil shocks and the zero bound on nominal interest rates." Journal of International Money and Finance 32 (February 2013): 941–67. http://dx.doi.org/10.1016/j.jimonfin.2012.08.002.

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9

Correia, Isabel, Emmanuel Farhi, Juan Pablo Nicolini, and Pedro Teles. "Unconventional Fiscal Policy at the Zero Bound." American Economic Review 103, no. 4 (June 1, 2013): 1172–211. http://dx.doi.org/10.1257/aer.103.4.1172.

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When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that, in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as wasteful public spending or future commitments to low interest rates. (JEL E12, E43, E52, E62, H20)

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10

McCallum, Bennett T. "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates." Journal of Money, Credit and Banking 32, no. 4 (November 2000): 870. http://dx.doi.org/10.2307/2601148.

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11

AMANO, ROBERT, and MALIK SHUKAYEV. "Risk Premium Shocks and the Zero Bound on Nominal Interest Rates." Journal of Money, Credit and Banking 44, no. 8 (November 28, 2012): 1475–505. http://dx.doi.org/10.1111/j.1538-4616.2012.00541.x.

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12

Coenen, Günter, and Volker W. Wieland. "Exchange-Rate Policy and the Zero Bound on Nominal Interest Rates." American Economic Review 94, no. 2 (April 1, 2004): 80–84. http://dx.doi.org/10.1257/0002828041302226.

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13

Yates, Tony. "Monetary Policy and the Zero Bound to Interest Rates: A Review1." Journal of Economic Surveys 18, no. 3 (July 2004): 427–81. http://dx.doi.org/10.1111/j.0950-0804.2004.00227.x.

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14

Dotsis, George. "Investment under uncertainty with a zero lower bound on interest rates." Economics Letters 188 (March 2020): 108954. http://dx.doi.org/10.1016/j.econlet.2020.108954.

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15

Maclachlan, Fiona. "Negative interest rates: a Keynesian perspective." Review of Keynesian Economics 7, no. 2 (April 2019): 171–84. http://dx.doi.org/10.4337/roke.2019.02.04.

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One of the most surprising recent developments in financial markets has been the emergence of negative yields on long-term debt. This development contradicts the notion of the zero lower bound which, until recently, was taken as a given in monetary policy discussions. In this paper, I look at the phenomenon of negative yields through the lens of Keynes's liquidity-preference theory of interest. I review changes to the financial market environment that have led to a shift in the liquidity of government bonds relative to bank deposits, and with this empirical context in place, I argue Keynes's theory is consistent with the phenomenon of negative bond yields. Finally, I consider Keynes's thought in relation to a negative interest-rate policy (NIRP) and argue that while he would be opposed to a NIRP as a temporary expedient, a mildly negative policy rate fits with his long-run vision for a world with a zero risk-free long-term interest rate.

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16

Rogoff, Kenneth. "Dealing with Monetary Paralysis at the Zero Bound." Journal of Economic Perspectives 31, no. 3 (August 1, 2017): 47–66. http://dx.doi.org/10.1257/jep.31.3.47.

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Recently, the key constraint for central banks is the zero lower bound on nominal interest rates. Central banks fear that if they push short-term policy interest rates too deeply negative, there will be a massive flight into paper currency. This paper asks whether, in a world where paper currency is becoming increasingly vestigial outside small transactions (at least in the legal, tax compliant economy), there might be relatively simple ways to finesse the zero bound without affecting how most ordinary people live. Surprisingly, this question gets little attention compared to the massive number of articles that take the zero bound as given and look for out-of-the-box solutions for dealing with it. In an inversion of the old joke, it is a bit as if the economics literature has insisted on positing “assume we don't have a can opener,” without considering the possibility that we might be able to devise one. It makes sense not to wait until the next financial crisis to develop plans. Fundamentally, there is no practical obstacle to paying negative (or positive) interest rates on electronic currency and, as we shall see, effective negative rate policy does not require eliminating paper currency.

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17

Adam, Klaus, and Roberto M. Billi. "Discretionary monetary policy and the zero lower bound on nominal interest rates." Journal of Monetary Economics 54, no. 3 (April 2007): 728–52. http://dx.doi.org/10.1016/j.jmoneco.2005.11.003.

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18

Buiter, Willem H. "Negative nominal interest rates: Three ways to overcome the zero lower bound." North American Journal of Economics and Finance 20, no. 3 (December 2009): 213–38. http://dx.doi.org/10.1016/j.najef.2009.10.001.

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19

Singh, Ajay Pratap, and Michael Nikolaou. "Optimal Rules for Central Bank Interest Rates Subject to Zero Lower Bound." Economics: The Open-Access, Open-Assessment E-Journal 8, no. 2014-37 (2014): 1. http://dx.doi.org/10.5018/economics-ejournal.ja.2014-37.

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20

Zhang, Ji. "Macroeconomic news and the real interest rates at the zero lower bound." Journal of Macroeconomics 48 (June 2016): 172–85. http://dx.doi.org/10.1016/j.jmacro.2016.04.002.

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21

Buiter, Willem H., and Nikolaos Panigirtzoglou. "Overcoming the Zero Bound on Nominal interest Rates with Negative Interest on Currency: Gesell's Solution." Economic Journal 113, no. 490 (September 29, 2003): 723–46. http://dx.doi.org/10.1111/1468-0297.t01-1-00162.

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22

Epstein, D., and P. Wilmott. "A New Model for Interest Rates." International Journal of Theoretical and Applied Finance 01, no. 02 (April 1998): 195–226. http://dx.doi.org/10.1142/s0219024998000114.

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There are many theories and models underlying the valuation of fixed income security portfolios. This work addresses the problem from a new perspective: the objective is to find a lower bound for the value of a portfolio of cash flows. We set up conditions for the evolution of a short-term interest rate and value a liability using its present value. We formulate a first-order nonlinear hyperbolic partial differential equation for the value, V, of the portfolio. We explore the solution of this equation and then hedge our portfolio with market-traded zero-coupon bonds of known value. We include some salient examples — generating the Yield Envelope and valuing caps, floors and bond options.

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23

Iwata, Shigeru, and Shu Wu. "A NOTE ON FOREIGN EXCHANGE INTERVENTIONS AT ZERO INTEREST RATES." Macroeconomic Dynamics 16, no. 5 (September 7, 2012): 802–17. http://dx.doi.org/10.1017/s1365100512000120.

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This note uses a nonlinear structural vector autoregression model to empirically investigate the effectiveness of official foreign exchange (FX) interventions in an economy when interest rates are constrained to the zero level, based on Japanese data in the 1990s. The model allows us to estimate the effects of FX interventions operating through different channels. We find that FX interventions are still capable of influencing the foreign exchange rate in a zero-interest-rate environment, even though their effects are greatly reduced by the zero lower bound on interest rates. Our results suggest that although it might be feasible to use the exchange rate as an alternative monetary policy instrument at zero interest rates as proposed by McCallum (Inflation Targeting and the Liquidity Trap, NBER working paper 8225, 2000), the exchange rate–based Taylor rule may not be very effective in achieving the ultimate policy goals.

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24

Christiano, Lawrence J. "Comment on Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates." Journal of Money, Credit and Banking 32, no. 4 (November 2000): 905. http://dx.doi.org/10.2307/2601149.

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25

Wallace, Neil. "Comment on Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates." Journal of Money, Credit and Banking 32, no. 4 (November 2000): 931. http://dx.doi.org/10.2307/2601150.

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26

Dhami, Sanjit, and Ali al-Nowaihi. "Optimal institutional design when there is a zero lower bound on interest rates." Oxford Economic Papers 63, no. 4 (July 9, 2011): 700–721. http://dx.doi.org/10.1093/oep/gpr030.

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27

SCHMIDT, SEBASTIAN. "Optimal Monetary and Fiscal Policy with a Zero Bound on Nominal Interest Rates." Journal of Money, Credit and Banking 45, no. 7 (September 9, 2013): 1335–50. http://dx.doi.org/10.1111/jmcb.12054.

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28

Adam, Klaus, and Roberto M. (Roberto Mario) Billi. "Optimal Monetary Policy under Commitment with a Zero Bound on Nominal Interest Rates." Journal of Money, Credit, and Banking 38, no. 7 (2006): 1877–905. http://dx.doi.org/10.1353/mcb.2006.0089.

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29

Grisse, Christian. "The zero lower bound and movements in the term structure of interest rates." Economics Letters 131 (June 2015): 66–69. http://dx.doi.org/10.1016/j.econlet.2015.03.039.

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30

Brózda, Dominika. "Transmission mechanism of the Federal Reserve System’s monetary policy in the conditions of zero bound on nominal interest rates." Equilibrium 11, no. 4 (December 31, 2016): 751. http://dx.doi.org/10.12775/equil.2016.034.

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The experience of Japan from the 90s of the twentieth century and the recent global financial crisis has shown that the zero lower bound problem has ceased to be a theoretical curiosity and became the subject of intense scientific discussion. This issue is closely linked with John Maynard Keynes’s liquidity trap. The phenomenon of the zero lower bound is very controversial. Not all economists agree that it may restrict the effectiveness of the central bank’s actions. The aim of the article is to present the views of economists on this transmission mechanism of monetary policy under the zero lower bound. The paper also attempts to evaluate the effectiveness of the Federal Reserve System’s monetary policy at zero nominal interest rates.

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31

Datta, Deepa D., Benjamin K. Johannsen, Hannah Kwon, and Robert J. Vigfusson. "Oil, Equities, and the Zero Lower Bound." American Economic Journal: Macroeconomics 13, no. 2 (April 1, 2021): 214–53. http://dx.doi.org/10.1257/mac.20180488.

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From late 2008 to 2014, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence that these changes resulted from the zero lower bound (ZLB) on nominal interest rates, consistent with the theoretical predictions of a model that includes the ZLB. Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment. (JEL E12, E32, E43, G12, G14, Q43)

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32

Ulate, Mauricio. "Going Negative at the Zero Lower Bound: The Effects of Negative Nominal Interest Rates." American Economic Review 111, no. 1 (January 1, 2021): 1–40. http://dx.doi.org/10.1257/aer.20190848.

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After the Great Recession several central banks started setting negative nominal interest rates in an expansionary attempt, but the effectiveness of this measure remains unclear. Negative rates can stimulate the economy by lowering the rates that commercial banks charge on loans, but they can also erode bank profitability by squeezing deposit spreads. This paper studies the effects of negative rates in a new DSGE model where banks intermediate the transmission of monetary policy. I use bank-level data to calibrate the model and find that monetary policy in negative territory is between 60 and 90 percent as effective as in positive territory. (JEL E12, E32, E43, E52, E58, G21)

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33

Fischer, Stanley. "Monetary Policy, Financial Stability, and the Zero Lower Bound." American Economic Review 106, no. 5 (May 1, 2016): 39–42. http://dx.doi.org/10.1257/aer.p20161005.

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Much has happened in the world of central banking in the past decade. In this paper, I focus on three issues associated with the zero lower bound (ZLB) on short-term nominal interest rates and the nexus between monetary policy and financial stability: 1) whether we are moving toward a permanently lower long-run equilibrium real interest rate; 2) what steps can be taken to mitigate the constraints imposed by the ZLB; and 3) whether and how financial stability considerations should be incorporated in the conduct of monetary policy. These important topics deserve the attention of both academic and government professionals.

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34

Morelli, Giacomo, and Lea Petrella. "Option Pricing, Zero Lower Bound, and COVID-19." Risks 9, no. 9 (September 13, 2021): 167. http://dx.doi.org/10.3390/risks9090167.

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This paper provides a quantitative assessment of equity options priced at the Zero Lower Bound, i.e., when interest rates are set essentially to zero. We obtain closed form formulas for American options when the Zero Lower Bound policy holds. We perform numerical implementation of American put options written on the stock Federal National Mortgage Association (FNMA) and of related bounds for the optimal exercise. The results show similarities with the corresponding European options priced at the Zero Lower Bound during the COVID-19 crisis.

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35

Kurihara, Yutaka. "Term Structure of Interest Rates under Zero or Low Bound: The Recent Japanese Case." Economy 3, no. 1 (March 1, 2016): 19–23. http://dx.doi.org/10.20448/journal.502/2016.3.1/502.1.19.23.

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36

Claus, Edda, Iris Claus, and Leo Krippner. "Monetary Policy Spillovers across the Pacific when Interest Rates Are at the Zero Lower Bound." Asian Economic Papers 15, no. 3 (October 2016): 1–27. http://dx.doi.org/10.1162/asep_a_00448.

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To conduct monetary policy effectively, central banks need to understand the transmission of monetary policy into financial markets. In this paper we investigate the effects of Japanese and U.S. monetary policy shocks on their own asset markets, and the spillovers into each other's markets. Because short-term nominal interest rates have been effectively zero in Japan since January 1998 and in the United States from late 2008, however, monetary policy shocks cannot be quantified by considering observable changes in short-term market interest rates. Therefore, in our analysis we use a shadow short rate―a quantitative measure of overall conventional and unconventional monetary policy that is estimated from the term structure of interest rates. Our results suggest that the operation of monetary policy at the zero lower bound of interest rates alters the transmission of shocks. In particular, we find a limited response of exchange rates during the first episode of unconventional monetary policy in Japan but a significant impact since 2006.

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37

Rösl, Seitz, and Tödter. "The Cost of Overcoming the Zero Lower-Bound: A Welfare Analysis." Economies 7, no. 3 (July 4, 2019): 67. http://dx.doi.org/10.3390/economies7030067.

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To broaden the operational scope of monetary policy, several authors suggest cash abolition as an appropriate means of breaking through the zero lower-bound. We argue that the welfare costs of bypassing the zero lower-bound by getting rid of cash entirely are analytically equivalent to negative interest rates on cash holdings. Using a money-in-the-utility-function model, we measure in two ways the welfare loss consumers as money holders would be forced to bear once the zero lower-bound is broken: in terms of the amount needed to compensate consumers (compensated variation), and as excess burden (deadweight loss) imposed on the economy as a whole. We calibrated the model for the euro area and for Germany. Our findings suggest that the welfare losses of negative interest rates incurred by consumers as holders of cash and transaction balances (M3) are large and enduring, notably if implemented in the current low-interest rate environment.

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38

Swanson, Eric T., and John C. Williams. "Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates." American Economic Review 104, no. 10 (October 1, 2014): 3154–85. http://dx.doi.org/10.1257/aer.104.10.3154.

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According to standard macroeconomic models, the zero lower bound greatly reduces the effectiveness of monetary policy and increases the efficacy of fiscal policy. However, private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current short-term rate. Put differently, longer-term yields matter. We show how to measure the zero bound's effects on yields of any maturity. Indeed, 1- and 2-year Treasury yields were surprisingly unconstrained throughout 2008 to 2010, suggesting that monetary and fiscal policy were about as effective as usual during this period. Only beginning in late 2011 did these yields become more constrained. (JEL E43, E52, E62)

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39

Oda, Nobuyuki, and Takashi Nagahata. "On the function of the zero interest rate commitment: Monetary policy rules in the presence of the zero lower bound on interest rates." Journal of the Japanese and International Economies 22, no. 1 (March 2008): 34–67. http://dx.doi.org/10.1016/j.jjie.2007.03.002.

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40

Wright, Jonathan H. "What does Monetary Policy do to Long‐term Interest Rates at the Zero Lower Bound?" Economic Journal 122, no. 564 (October 29, 2012): F447—F466. http://dx.doi.org/10.1111/j.1468-0297.2012.02556.x.

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41

Christensen, Jens H. E., and Glenn D. Rudebusch. "A New Normal for Interest Rates? Evidence from Inflation-Indexed Debt." Review of Economics and Statistics 101, no. 5 (December 2019): 933–49. http://dx.doi.org/10.1162/rest_a_00821.

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The downtrend in U.S. interest rates over the past two decades may partly reflect a decline in the longer-run equilibrium real rate of interest. We examine this issue using dynamic term structure models that account for time-varying term and liquidity risk premiums and are estimated directly from prices of individual inflation-indexed bonds. Our finance-based approach avoids two potential pitfalls of previous macroeconomic analyses: structural breaks at the zero lower bound and misspecification of output and inflation dynamics. We estimate that the longer-run equilibrium real rate has fallen about 2 percentage points and appears unlikely to rise quickly.

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42

Woodford, Michael, and Yinxi Xie. "Policy Options at the Zero Lower Bound When Foresight is Limited." AEA Papers and Proceedings 109 (May 1, 2019): 433–37. http://dx.doi.org/10.1257/pandp.20191084.

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We reconsider several monetary and fiscal policies that have been proposed as tools of stabilization policy when conventional interest-rate policy is constrained by the zero lower bound on interest rates, assuming that households and firms are capable of explicit forward planning over only a limited horizon. The predicted effects of all of the policies are somewhat different than under rational expectations, but credible announcements about future policy can still influence behavior, and there is, if anything, an even stronger case for pursuing systematic policies outside crisis periods in order to shape expectations during a crisis.

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43

Nesterova, Kristina. "Monetary policy special features in the context of low interest rates." Socium i vlast 2 (2020): 50–64. http://dx.doi.org/10.22394/1996-0522-2020-2-50-64.

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Introduction. The paper considers a wide range of monetary policy rules: integral stabilization, NGDP targeting, price level targeting, raising the inflation target, introducing negative nominal interest rates etc. The author also considers discretionary policy used by central banks when the nominal rate is close to zero, such as dramatic preventive cut of the key interest rate and interventions in the open markets with the aim of cutting long-term interest rates. The relevance of this problem is supported by global long-term macroeconomic and demographic factors, such as the dynamics of oil prices and the aging of the population. The aim of the paper is to identify the most effective monetary policy rules in order to reduce the risk of a nominal interest rate falling to zero. Methods. Analysis of the background and the results of general equilibrium models modeling monetary policy is carried out. Analysis of the role of current global trends (based on statistics) in aggravating the problem of declining interest rates. Scientific novelty of the research. The author systematizes the conclusions of modern macroeconomic theory, which offers a number of monetary rules making it possible to reduce the likelihood of falling into the zero bound of interest rate. Results. The effectiveness of monetary rules such as targeting nominal GDP and price levels in preventing the nominal interest rate from falling to zero is shown, primarily due to more efficient public expectations management which is a weak point of discretionary intervention. Conclusions. Under the current global factors for many developed countries and some oil-exporters, the downward trend in nominal rates persists. Combined with slowdown in economic growth, such threat may have negative consequences for the Russian economy. In this case, it seems reasonable to stick to the inflation target above 2% per year and in the future to consider switching to targeting the price level or nominal GDP.

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44

Kiley, Michael T. "Exchange Rates, Monetary Policy Statements, and Uncovered Interest Parity : Before and After the Zero Lower Bound." Finance and Economics Discussion Series 2013, no. 17 (2013): 1–26. http://dx.doi.org/10.17016/feds.2013.17.

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45

Donzwa, Wilson, Rangan Gupta, and Mark E. Wohar. "Volatility Spillovers between Interest Rates and Equity Markets of Developed Economies." Journal of Central Banking Theory and Practice 8, no. 3 (September 1, 2019): 39–50. http://dx.doi.org/10.2478/jcbtp-2019-0023.

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Abstract This study employs the recently developed Lagrange multiplier-based causality-in-variance test by Hafner and Herwartz (2006), to determine the volatility spillovers between interest rates and stock returns for the US, the euro area, the UK, and Japan. The investigation pays careful attention to volatility transmissions between stock returns and interest rates before and after these economies reached the Zero Lower Bound (ZLB), which is permitted via the use of Shadow Short Rates (SSR), used as a proxy for monetary policy decisions. The results based on daily data imply that while bidirectional causality is observed, the volatility spillover from interest rates to stock markets are more prominent for the full-sample, as well as the sub-samples covering the pre- and during-ZLB periods.

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46

Palley, Thomas I. "The fallacy of the natural rate of interest and zero lower bound economics: why negative interest rates may not remedy Keynesian unemployment." Review of Keynesian Economics 7, no. 2 (April 2019): 151–70. http://dx.doi.org/10.4337/roke.2019.02.03.

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This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest rigidity in that pre-Keynesian tradition. The paper argues negative nominal interest rates, even if feasible, may be unable to remedy Keynesian demand shortage unemployment, and might even aggravate the problem. That is because there exist non-reproduced assets whose return dominates that of investment, and saving may also increase in response to negative rates. Consequently, there may be no natural rate of interest.

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47

Sutch, Richard. "READING KEYNES AT THE ZERO LOWER BOUND: THE GREAT DEPRESSION, THE LIQUIDITY TRAP, AND UNCONVENTIONAL POLICY." Journal of the History of Economic Thought 40, no. 3 (June 20, 2018): 301–34. http://dx.doi.org/10.1017/s1053837217000013.

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John Maynard Keynes’s analysis of the Great Depression has strong parallels to recent theorizing about the post-2008 Great Recession. There are also remarkable similarities between the two historical episodes: the collapse of demand for new fixed investment, the role of the zero lower bound liquidity trap in hampering conventional monetary policy, the multi-year period of near-zero short-term rates, and the protracted period of subnormal prosperity. A major difference between then and now is that monetary authorities in the recent situation actively pursued an unconventional policy with massive purchases of long-term securities. Keynes couldn’t convince authorities of his era to pursue such a plan, but it was precisely the monetary policy he advocated for a depressed economy stuck at the zero lower bound of nominal interest rates.

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48

Illing, Gerhard. "The Limits of a Negative Interest Rate Policy (NIRP)." Credit and Capital Markets – Kredit und Kapital: Volume 51, Issue 4 51, no. 4 (December 1, 2018): 561–85. http://dx.doi.org/10.3790/ccm.51.4.561.

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Abstract The paper analyzes the experience with unconventional measures to cope with the Zero Lower Bound. It argues that forward guidance and quantitative easing are the natural extension of optimal monetary policy within the New Keynesian Framework, facing a Lower Bound. Unconventional policy had significant effects on financial variables and contributed to stabilizing the real economy. Negative rates have been successful in pushing the effective lower bound below zero. But given the risk of damaging side effects on financial stability and on central bank independence, these policy tools are likely to be less powerful and shorter-lived compared to standard tools. In view of the long-term decline of the natural rate of interest, raising the inflation target up to 3–4 percent appears to be the most promising way to relax the constraint imposed by the lower bound, providing a resilient buffer for effective stabilization. Zusammenfassung Die Arbeit untersucht die Auswirkungen unkonventioneller Geldpolitik. Sie zeigt, dass Forward Guidance und Quantitative Lockerung als Anwendung optimaler Geldpolitik im Rahmen Neu-Keynesianischer Modelle angesichts einer effektiven Zinsuntergrenze zu verstehen sind. Unkonventionelle Geldpolitik hat erfolgreich zur Stabilisierung von Finanzmärkten und Realwirtschaft beigetragen. Auch wenn sich die Zinsuntergrenze in gewissem Rahmen unter null senken lässt, ist die Wirkung unkonventioneller Maßnahmen – im Vergleich zu Standard-Instrumenten – jedoch kurzlebiger und weniger schlagkräftig, unter Berücksichtigung der Risiken für Finanzmarktstabilität und Zentralbankunabhängigkeit. Angesichts des nachhaltigen Rückgangs des “natürlichen” Realzinses erscheint eine Abhebung des Inflationsziels auf 2–4 % der geeignetste Weg, um einen robusten Mechanismus effektiver Stabilisierung zu erreichen. JEL Classification: E43, E52, E58

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Grabia, Tomasz. "Actual interest rates versus hypothetical interest ratesresulting from the Taylor rulein the euro area and the United States." Wiadomości Statystyczne. The Polish Statistician 64, no. 4 (April 29, 2019): 22–48. http://dx.doi.org/10.5604/01.3001.0013.8508.

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The aim of the article is to examine the degree of matching actual interest rates with hypothetical ones, calculated on the basis of original and modified (with greater GDP gap significance when setting interest rates) Taylor rule. The analysis was conducted for the two largest world economies by nominal GDP, i.e. the euro area and the United States of America for the period 2001—2017.Two hypotheses were tested in the article. Firstly, the actual interest rates of the Europe-an Central Bank are more strongly correlated with the rates resulting from the original Taylor rule. Secondly, the actual interest rates of the Federal Reserve System are more strongly correlated with the rates arising from the modified Taylor rule. On the basis of the conducted analysis, the first hypothesis was confirmed, while the second one was rejected.However, it should be noted that the results of the study could be different were it not for the economic crisis, macroeconomic destabilization and lack of the possibility of reducing interest rates related to zero lower bound. That particularly applies to the second hypothesis and the 2008—2017 sub-period.

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Funashima, Yoshito. "Do the Bank of Japan’s Unconventional Monetary Policies Decrease Real Interest Rates under a Zero Lower Bound?" Open Journal of Social Sciences 06, no. 07 (2018): 122–30. http://dx.doi.org/10.4236/jss.2018.67010.

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