series: OCFEB Research Memoranda;RM 0203
The zero lower bound on nominal interest rates and monetary policy effectiveness: A survey
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This paper surveys the literature on monetary policy at the zero lower bound on nominal interest rates. Certain crucial insights regarding expectations have been neglected in recent research in this field. Taking this into account, the interactions between demand, confidence and supply shocks appear crucial for hitting the zero lower bound and escaping from it. Restoring confidence can play a vital role in solving the zero lower bound problem, thereby avoiding a liquidity trap.
- interest rates
- interest rate
- liquidity trap