This paper discusses the likely evolution of U.S. inflation in the near and medium term on the basis of (1) past U.S. experience with very low levels of inflation, (2) the most recent Japanese experience with deflation, and (3) recent U.S. micro evidence on downward nominal wage rigidity. Our...

This paper assesses the importance of the zero lower bound on nominal interest rates for the interest-rate channel of monetary policy. We simulate several interest-rate setting policy rules with either high or low inflation targets. We determine the extent to which the zero bound prevents real...