An IS-LM analysis of the zero-bound problem

Evan Koenig

Staff Papers, 2011, issue Apr

Abstract: Policy options for stimulating real activity are limited once short-term interest rates have been driven to zero. Monetary policy makers face the difficult challenge of preventing or reversing declines in near-term inflation expectations while preserving confidence in the central bank's commitment to long-term price stability. Fiscal policy makers must commit to a credible plan for maintaining or raising near-term government purchases while minimizing increases in future marginal tax rates.

Keywords: Fiscal policy; Monetary policy; Price levels (search for similar items in EconPapers)
Date: 2011
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