The stochastic lower bound
Riccardo M. Masolo and
Pablo Winant ()
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Pablo Winant: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
No 754, Bank of England working papers from Bank of England
Since the Great Recession policy rates have been extremely low, but neither absolutely constant, nor exactly set to zero. We thus augment a standard zero lower bound model to study the effects of a stochastic lower bound (SLB) on policy rates. We find that a less predictable SLB helps keep inflation closer to target by lowering expectations of future values of the SLB when interest rate cuts are not an option.
Keywords: Zero lower bound; DSGE (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0754
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