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Monetary policy regimes and the lower bound on interest rates

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  • Corbisiero, Giuseppe

    (Central Bank of Ireland)

Abstract

This Letter analyses different monetary policy regimes from the New Keynesian perspective. In the presence of a lower bound on policy rates, adjusting the inflation target with past realisations of inflation strengthens monetary stimuli during recessions. However, amplified short-term fluctuations in inflation and output make such history-dependent regimes unappealing. Therefore, this Letter discusses a hybrid regime that incorporates their advantages without suffering from their drawbacks.

Suggested Citation

  • Corbisiero, Giuseppe, 2018. "Monetary policy regimes and the lower bound on interest rates," Economic Letters 6/EL/18, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:6/el/18
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    References listed on IDEAS

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