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Imperfect credibility and the zero lower bound

Bodenstein, M, Hebden, J and Praca Cavaco Nunes, Ricardo (2012) Imperfect credibility and the zero lower bound Journal of Monetary Economics, 59 (2). pp. 135-149.

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Abstract

As the nominal interest rate cannot fall below zero, a central bank with imperfect credibility faces a significant challenge to stabilize the economy in a New Keynesian model during a large recession. We characterize the optimal monetary policy at the zero lower bound for the nominal interest rate if credibility is imperfect. Confronting monetary policy communication of the U.S. Federal Reserve and the Swedish Riksbank with such a framework, the credibility of both institutions is shown to have been low in the aftermath of the 2008 economic crisis.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Bodenstein, MUNSPECIFIEDUNSPECIFIED
Hebden, JUNSPECIFIEDUNSPECIFIED
Praca Cavaco Nunes, Ricardoricardo.nunes@surrey.ac.ukUNSPECIFIED
Date : 2012
Identification Number : 10.1016/j.jmoneco.2012.01.002
Copyright Disclaimer : Copyright 2012. Published by Elsevier B.V.
Depositing User : Melanie Hughes
Date Deposited : 10 Oct 2017 17:16
Last Modified : 10 Oct 2017 17:16
URI: http://epubs.surrey.ac.uk/id/eprint/842504

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