This paper uses the IMF''s macroeconomic model MULTIMOD to examine the implications of the zero-interest-rate floor (ZIF) for the design of monetary policy in Japan. Similar to findings in other studies, targeting rates of inflation lower than 2.0 percent significantly increases the likelihood...

We examine the effects of various borrower-based macroprudential tools in a New Keynesian environment where both real and nominal interest rates are low. Our model features long-term debt, housing transaction costs and a zero-lower bound constraint on policy rates. We find that the long-term...

An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation....

Empirical evidence suggests that goods are highly heterogeneous with respect to the degree of price rigidity. We develop a DSGE model featuring heterogeneous nominal rigidities across two sectors to study the equilibrium determinacy and stability under adaptive learning for interest rate rules...

This paper investigates how monetary policy can help ward off a protracted deflationary slump when policy rates are near the zero bound by studying the experience of Japan during the ""Lost Decade"" which followed the asset-price bubble collapse in the early 1990s. Estimation results based on a...

We analyze the European Central Bank''s (ECB''s) response to the global financial crisis. Our results suggest that even during the crisis, the core part of ECB''s monetary policy transmission-from policy rates to market rates-has continued to operate, but at a decreased efficiency. We also find...

The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and...

This paper develops a model featuring both a macroeconomic and a financial friction that speaks to the interaction between monetary and macro-prudential policies. There are two main results. First, real interest rate rigidities in a monopolistic banking system have an asymmetric impact on...

Upward sloping yield curves are hard to reconcile with the positive association between income and inflation (the Phillips curve) in consumption-based asset pricing models. Using US and UK data, this paper shows inflation is negatively correlated with long-run income growth but positively...

Using data on long-term interest rates for 17 industrial countries, this paper develops some simple measures of monetary policy credibility and then tests if such measures improve the out-of-sample forecasts of conventional models of the inflation-unemployment process. The results provide some...