Fed’s Effective Lower Bound Constraint on Monetary Policy Created Uncertainty

Michael Plante, Alexander Richter and Nathaniel Throckmorton

Economic Letter, 2017, vol. 12, issue 11, 4 pages

Abstract: Uncertainty about the economy increased when the Fed reduced the federal funds rate to its effective lower bound because the constraint restricted the Fed?s ability to stabilize the economy. As a result, a much stronger negative relationship between uncertainty and economic activity emerged during and shortly after the Great Recession.

Date: 2017
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