Overcoming the zero bound on interest rate policy

Marvin Goodfriend

No 00-03, Working Paper from Federal Reserve Bank of Richmond

Abstract: The paper proposes three options for overcoming the zero bound on interest rate policy: a carry tax on money, open market operations in long bonds, and monetary transfers. A variable carry tax on electronic bank reserves could enable a central bank to target negative nominal interest rates. A carry tax could be imposed on currency to create more leeway to make interest rates negative. Quantitative policy--monetary transfers and open market purchases of long bonds--could stimulate the economy by creating liquidity broadly defined. A central bank needs more fiscal support than usual from the Treasury to pursue quantitative policy at the interest rate floor.

Keywords: Monetary policy; Inflation (Finance); Liquidity (Economics) (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (192)

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Journal Article: Overcoming the Zero Bound on Interest Rate Policy (2000)
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