Monetary Policy in a Low Inflation Environment

Klaus Adam

Research Bulletin, 2004, vol. 1, 6-7

Abstract: Monetary policy is far from being ineffective when interest rates are close to zero or already at the lower bound. Close to zero, even more aggressive reactions to shocks seem optimal. At the lower bound, it is the credibility of the central bank, which is crucial to affect inflationary expectations and rescue the economy from the liquidity trap. JEL Classification: E5

Keywords: low Inflation; liquidity trap (search for similar items in EconPapers)
Date: 2004-11
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