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A model for interest rates near the zero lower bound: An overview and discussion

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Operating monetary policy when interest rates are already at or near zero comes with many challenges, as many countries have discovered in recent years. One aspect is that, if effective easing beyond a zero policy rate is desired, the policy rate constrained at zero will no longer conveniently summarise the stance of monetary policy and its typical transmission into the yield curve (longer-maturity interest rates) and the economy. In this note, I show how a framework for representing yield curve data in a zero lower bound (ZLB) environment can still allow monetary policy to be conveniently summarised in terms of an effective policy rate.

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  • Leo Krippner, 2012. "A model for interest rates near the zero lower bound: An overview and discussion," Reserve Bank of New Zealand Analytical Notes series AN2012/05, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbans:2012/05
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    References listed on IDEAS

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    1. Krippner, Leo, 2013. "Measuring the stance of monetary policy in zero lower bound environments," Economics Letters, Elsevier, vol. 118(1), pages 135-138.
    2. Leo Krippner & Leif Anders Thorsrud, 2009. "Forecasting New Zealand's economic growth using yield curve information," Reserve Bank of New Zealand Discussion Paper Series DP2009/18, Reserve Bank of New Zealand.
    3. Leo Krippner, 2011. "Modifying Gaussian term structure models when interest rates are near the zero lower bound," CAMA Working Papers 2011-36, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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    2. Hills, Robert & Ho, Kelvin & Reinhardt, Dennis & Sowerbutts, Rhiannon & Wong, Eric & Wu, Gabriel, 2019. "The international transmission of monetary policy through financial centres: Evidence from the United Kingdom and Hong Kong," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 76-98.
    3. Lukáš Pfeifer & Zdeněk Pikhart, 2014. "Vztah finanční a cenové stability v podmínkách ČR [The Relationship of Financial and Price Stability in the Context of the Czech Republic]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(1), pages 49-66.
    4. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2018. "Reassessing Taylor rules using improved housing rent data," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 243-257.

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