BEN BERNANKE AND THE ZERO BOUND

Laurence Ball

Contemporary Economic Policy, 2016, vol. 34, issue 1, 7-20

Abstract: type="main" xml:id="coep12103-abs-0001"> From 2000 to 2003, when Ben Bernanke was a professor and then a Fed Governor, he wrote extensively about monetary policy at the zero bound on interest rates. He advocated aggressive stimulus policies, such as a money-financed tax cut and an inflation target of 3%–4%. Yet, after U.S. interest rates hit zero in 2008, the Fed under Chairman Bernanke took more cautious actions. This paper asks when and why Bernanke changed his mind about zero-bound policy. The answer, at one level, is that he was influenced by analysis from the Fed staff that was presented at the Federal Open Market Committee (FOMC) meeting of June 2003. This answer raises another question: why did the staff's views influence Bernanke so strongly? I seek answers to this question in the social psychology literature on group decision-making. (JEL E52, E58)

Date: 2016
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Working Paper: Ben Bernanke and the Zero Bound (2012)
Working Paper: Ben Bernanke and the Zero Bound (2012)
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