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The effective lower bound and the desirability of gradual interest rate adjustments

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  • Schmidt, Sebastian

Abstract

The lower bound on nominal interest rates makes it desirable for monetary policy to aim for gradual adjustments of the policy rate in addition to the stabilisation of inflation and the output gap. JEL Classification: E52, E61

Suggested Citation

  • Schmidt, Sebastian, 2018. "The effective lower bound and the desirability of gradual interest rate adjustments," Research Bulletin, European Central Bank, vol. 45.
    • Handle: RePEc:ecb:ecbrbu:2018:0045:
    Note: 2179645
    as

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    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Schmidt, Sebastian & Nakata, Taisuke & Hills, Timothy, 2016. "The risky steady state and the interest rate lower bound," Working Paper Series 1913, European Central Bank.
    3. Taisuke Nakata & Sebastian Schmidt, 2019. "Gradualism and Liquidity Traps," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 182-199, January.
    4. Schmidt, Sebastian, 2016. "The effective lower bound: some implications for inflation dynamics beyond the current low interest rate environment," Research Bulletin, European Central Bank, vol. 29.
    5. Billi, Roberto M., 2017. "A Note On Nominal Gdp Targeting And The Zero Lower Bound," Macroeconomic Dynamics, Cambridge University Press, vol. 21(8), pages 2138-2157, December.
    6. Brian P. Sack, 1998. "Uncertainty, learning, and gradual monetary policy," Finance and Economics Discussion Series 1998-34, Board of Governors of the Federal Reserve System (U.S.).
    7. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
    8. Sebastian Schmidt, 2016. "The effective lower bound: some implications for inflation dynamics beyond the current low interest rate environment," Research Bulletin, European Central Bank, vol. 29.
    9. Michael Woodford, 2003. "Optimal Interest-Rate Smoothing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(4), pages 861-886.
    10. repec:ecb:ecbrbu:2016:0029:1 is not listed on IDEAS
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    More about this item

    Keywords

    Effective Lower Bound; Gradualism; Liquidity Traps; Monetary Policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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