Forward guidance and "lower for longer": The case of the ECB

Tilman Bletzinger and Volker Wieland

No 11117, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A number of contributions to research on monetary policy have suggested that policy should be asymmetric near the lower bound on nominal interest rates. As inflation and economic activity decline, policy should ease more aggressively than it would in the absence of the lower bound. As activity recovers and inflation picks up, the central bank should act to keep interest rates lower for longer than without the bound. In this note, we investigate to what extent the policy easing implemented by the ECB since summer 2013 mirrors the rate recommendations of a simple policy rule or deviates from it in a way that indicates a “lower for longer†approach to policy near zero interest rates.

Keywords: Monetary policy; Interest rates; European central bank; Forward guidance; Zero bound (search for similar items in EconPapers)
JEL-codes: E43 E47 E52 E58 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (14)

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Working Paper: Forward guidance and "lower for longer": The case of the ECB (2016)
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