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Negative Nominal Interest Rates: Three ways to overcome the zero lower bound
Buiter, Willem Hendrik - National Bureau of Economic Research (NBER) - 2009
The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...
Persistent link: https://www.econbiz.de/10005036814
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Illiquidity and Interest Rate Policy
Diamond, Douglas W.; Rajan, Raghuram G. - National Bureau of Economic Research (NBER) - 2009
The cheapest way for banks to finance long term illiquid projects is typically to borrow short term from households. But when household needs for funds are high, interest rates will rise sharply, debtors will have to shut down illiquid projects, and in extremis, will face more damaging runs....
Persistent link: https://www.econbiz.de/10005087453
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Optimal Taylor Rules in New Keynesian Models
House, Christopher; Boehm, Christoph E. - National Bureau of Economic Research (NBER) - 2014
and the inflation rate without error, then it is typically optimal to respond infinitely strongly to observed deviations … from the central bank's targets. If it observes inflation and the output gap with error, the central bank will temper its … terms of estimated output and inflation then it is optimal to respond infinitely strongly to estimated deviations from the …
Persistent link: https://www.econbiz.de/10010951201
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On the Optimal Choice of a Monetary Policy Instrument
Atkeson, Andrew; Chari, Varadarajan; Kehoe, Patrick J. - National Bureau of Economic Research (NBER) - 2007
The optimal choice of a monetary policy instrument depends on how tight and transparent the available instruments are and on whether policymakers can commit to future policies. Tightness is always desirable; transparency is only if policymakers cannot commit. Interest rates, which can be made...
Persistent link: https://www.econbiz.de/10005714373
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The Heterogeneous State of Modern Macroeconomics: A Reply to Solow
Chari, Varadarajan; Kehoe, Patrick J. - National Bureau of Economic Research (NBER) - 2007
Robert Solow has criticized our 2006 Journal of Economic Perspectives essay describing "Modern Macroeconomics in Practice." Solow eloquently voices the commonly heard complaint that too much macroeconomic work today starts with a model with a single type of agent. We argue that modern...
Persistent link: https://www.econbiz.de/10005778451
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Trade Dynamics in the Market for Federal Funds
Lagos, Ricardo; Afonso, Gara - National Bureau of Economic Research (NBER) - 2014
We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they meet, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive and...
Persistent link: https://www.econbiz.de/10011262797
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Stability First: Reflections Inspired by Otmar Issing's Success as the ECB's Chief Economist
Kashyap, Anil; Gaspar, Vitor - National Bureau of Economic Research (NBER) - 2006
In this paper, we review Otmar Issing's career as the ECB's inaugural chief economist and we document many notable successes. We try to infer some general principles that contributed to these successes and draw some lessons. In doing so, we review the evidence using Woodford%u2019s (2003) recent...
Persistent link: https://www.econbiz.de/10005710386
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The Macroeconomic Effects of Interest on Reserves
Ireland, Peter - National Bureau of Economic Research (NBER) - 2012
interest on reserves. While their effects on output and inflation are small, these policies require major adjustments in the …
Persistent link: https://www.econbiz.de/10011262796
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Endogenous Monetary Policy Regime Change
Davig, Troy; Leeper, Eric - National Bureau of Economic Research (NBER) - 2006
This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...
Persistent link: https://www.econbiz.de/10005089295
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Opting Out of the Great Inflation: German Monetary Policy After the Break Down of Bretton Woods
Beyer, Andreas; Gaspar, Vitor; Gerberding, Christina; … - National Bureau of Economic Research (NBER) - 2008
interpreted, first and foremost, as a commitment device. In our setting, a monetary target helps anchoring inflation and inflation … well as a strong response to deviations of inflation from target and to the activity growth gap. In contrast, the response …
Persistent link: https://www.econbiz.de/10005580496