Foreign exchange and the liquidity trap

Owen F. Humpage and Will Melick ()

Economic Commentary, 2003, issue Oct 1

Abstract: When short-term interest rates hover near zero, central banks may have difficulty offsetting downward momentum on prices and economic activity through traditional monetary-policy channels, since commercial banks have little incentive to make loans. Economists refer to this situation as a liquidity trap. Do exchange rate targets and foreign exchange operations, as some have suggested, offer a way to escape such a trap?

Keywords: Foreign exchange; Liquidity (Economics); Economic conditions - Japan (search for similar items in EconPapers)
Date: 2003 Written

Downloads: (external link)
http://www.clevelandfed.org/Research/commentary/2003/1001.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fedcec:y:2003:i:oct1

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Commentary from Federal Reserve Bank of Cleveland
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().