Monetary Policy When the Nominal Short-Term Interest Rate is Zero
Clouse James (),
Dale Henderson (),
Athanasios Orphanides (),
Small David H. () and
Additional contact information
Clouse James: Board of Governors of the Federal Reserve System
Small David H.: Board of Governors of the Federal Reserve System
The B.E. Journal of Macroeconomics, 2003, vol. 3, issue 1, 1-65
In an environment of low inflation, the Federal Reserve faces the possibility that it may not have provided enough monetary stimulus even though it had pushed the short-term nominal interest rate to its lower bound of zero. Assuming the nominal Treasury-bill rate had been lowered to zero, this paper considers whether further open market purchases of Treasury bills could spur aggregate demand through increases in the monetary base. Such action may be stimulative by increasing liquidity for financial intermediaries and households; by affecting expectations of the future paths of short-term interest rates, inflation, and asset prices; through distributional effects; or by stimulating bank lending through the credit channel. This paper also examines the alternative policy tools that are available to the Federal Reserve in theory, and notes the practical limitations imposed by the Federal Reserve Act. The tools the Federal Reserve has at its disposal include open market purchases of Treasury bonds and certain types of private-sector credit instruments; unsterilized and sterilized intervention in foreign exchange; lending through the discount window; and, in some circumstances, may include the use of options.
References: View complete reference list from CitEc
Citations: View citations in EconPapers (69) Track citations by RSS feed
Downloads: (external link)
https://www.degruyter.com/view/j/bejm.2003.3.1/bej ... .1088.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Working Paper: Monetary policy when the nominal short-term interest rate is zero (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:topics.3:y:2003:i:1:n:12
Ordering information: This journal article can be ordered from
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().