We use simulations of the Federal Reserve's FRB/US model to examine the efficacy of a number of proposals for reducing the consequences of the zero bound on nominal interest rates. Among the proposals are: a more aggressive monetary policy; promises to make up any shortfall in monetary ease...

The zero lower bound on nominal interest rates has constrained the Federal Reserve’s setting of the overnight federal funds rate for over three years running. According to many macroeconomic models, such an extended period of being stuck at the zero bound has important implications for the...

Presentation to the Financial Women’s Association of San Francisco, San Francisco, CA, October 15, 2012

Presentation to the Financial Women’s Association of San Francisco, San Francisco, CA, October 15, 2012

This paper reexamines the implications of the zero lower bound on interest rates for monetary policy and the optimal choice of steady-state inflation in light of the experience of the recent global recession. There are two main findings. First, the zero lower bound did not materially contribute...

We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky (so that the supply-side effects of tax changes are more complex than in standard fiscal analyses) and the only available sources of government revenue are...

The announcement of a plan to cut the U.S. federal budget deficit through the Gramm-Rudman-Hollings legislation provides an excellent opportunity to examine the influence of expectations on economic behavior. This paper presents a small forward-looking macroeconomic model and simulates the...