This paper presents the results of a quantitative study of the implications of the zero lower bound on nominal interest rates which was undertaken in the context of the review of the ECBu0092s monetary policy strategy in Spring 2003. Focusing on the euro area, the paper provides an assessment of...

This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the...

Assigning a discretionary central bank a mandate to stabilize an average in ation rate| rather than a period-by-period in ation rate|increases welfare in a New Keynesian model with an occasionally binding lower bound on nominal interest rates. Under rational expecta- tions, the...

This paper investigates how the monetary policy transmission channels change once the economy is in a low interest rate environment. We estimate a nonlinear model for the euro area and its five largest countries over the period 1999q2-2019q1 and allow for the effects of monetary policy shocks to...

Could a monetary policy loosening entail the opposite effect than the intended expansionary impact in a low interest rate environment? We demonstrate that the risk of hitting the rate at which the effect reverses depends on the capitalization of the banking sector by using a non-linear...

The zero lower bound (ZLB) constraint on interest rates makes speed limit policies (SLPs) - policies aimed at stabilizing output growth - less effective. Away from the ZLB, the history dependence induced by a concern for output growth stabilization improves the inflation-output tradeoff for a...

We study interest rates transmission to savings at low and negative rates. Exploiting cohorts of consumers from a data-rich multi-country survey, we show how the strength of interest rate transmission to savings varies with the level of nominal interest rates. This response is positive when...

Empirical analyses starting from Laubach and Williams (2003) find that the natural rate of interest is not constant in the long-run. This paper studies the optimal response to stochastic changes of the long-run natural rate in a suitably modified version of the new Keynesian model. We show that,...

Based on ordered Probit models and twenty years of euro area data, we estimate empirical reaction functions for the ECB's monetary policy and augment them with communication indicators. First, we find that the ECB responded to risks to price stability in line with its primary objective, and that...