Zero nominal interest rates: why they're good and how to get them

Harold Cole and Narayana Kocherlakota

Quarterly Review, 1998, vol. 22, issue Spr, 2-10

Abstract: This study shows that in a standard one-sector neoclassical growth model, in which money is introduced with a cash-in-advance constraint, zero nominal interest rates are optimal. Milton Friedman argued in 1969 that zero nominal rates are necessary for efficient resource allocation. This study shows that they are not only necessary but sufficient. The study also characterizes the monetary policies that will implement zero rates. The set of such policies is quite large. The only restriction these policies must satisfy is that asymptotically money shrinks at a rate no greater than the rate of discount.

Keywords: Interest; rates (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://minneapolisfed.org/research/qr/qr2221.pdf (application/pdf)
http://minneapolisfed.org/research/qr/qr2221.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmqr:y:1998:i:spr:p:2-10:n:v.22no.2

Access Statistics for this article

More articles in Quarterly Review from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().