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The Zero Bound on Nominal Interest Rates and Optimal Monetary Policy Under Discretion

Anton Nakov

出版	SSRN, 2004
URL	http://books.google.com.hk/books?id=HZffzwEACAAJ&hl=&source=gbs_api

註釋

I study how the zero bound on nominal interest rates affects optimal discretionary monetary policy within the standard New Keynesian framework. I find that the non-negativity constraint implies an optimal policy which is more expansionary and more aggressive near the zero bound compared to the optimal rule, which ignores this constraint. This "precautionary loosening" of monetary policy when the risk of deflation is high is required to offset the negative effect of private sector expectations on the current output gap and inflation. The effect is found to be quantitatively significant and to increase with the variance and persistence of the natural real interest rate.