IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-04892254.html
   My bibliography  Save this paper

A Model of Post-2008 Monetary Policy

Author

Listed:
  • Behzad Diba

    (Department of Economics, Georgetown University)

  • Olivier Loisel

    (CREST-ENSAE, IP Paris - Institut Polytechnique de Paris)

Abstract

We introduce banks and bank reserves into the basic New Keynesian model and allow the central bank to set both the interest rate on reserves (IOR rate) and the nominal stock of reserves. Our model can account, in qualitative terms, for three key features of US inflation during the recent zero-lower-bound (ZLB) episodes: no significant deflation, little inflation volatility, and no significant inflation following quantitative-easing policies. Crucial to this result is our assumption that demand for bank reserves got close to satiation, but did not reach full satiation. We introduce liquid government bonds into the model to reconcile our non-satiation assumption with the fact that Treasury-bill rates were often below the IOR rate during the ZLB episodes. Looking ahead, we explore the implications of our model for the normalization of monetary policy and its operational framework (floor system).

Suggested Citation

  • Behzad Diba & Olivier Loisel, 2025. "A Model of Post-2008 Monetary Policy," Working Papers hal-04892254, HAL.
  • Handle: RePEc:hal:wpaper:hal-04892254
    Note: View the original document on HAL open archive server: https://hal.science/hal-04892254v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04892254v1/document
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-04892254. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.