Monetary policy when the nominal short-term interest rate is zero

Topics in Macroeconomics

Volumn 3, Issue 1, 2003, Pages

  Clouse, James ^a   Henderson, Dale ^a,c   Orphanides, Athanasios ^a,c   Small, David H ^a,c   Tinsley, P A ^b  

^a FEDERAL RESERVE BOARD   (United States)

^b UNIVERSITY OF CAMBRIDGE   (United Kingdom)

^c Bd Governors Fed Reserve Syst ^*  (United States)

Author keywords

Discount window lending; Federal Reserve Act; Liquidity trap; Monetary policy; Open market operations; Options; Zero bound

Indexed keywords

EID: 1342266004     PISSN: 15345998     EISSN: 15345998     Source Type: Journal    
DOI: 10.2202/1534-5998.1088     Document Type: Article

References (86)

1. Ahearne, Alan, Joseph Gagnon, Jane Haltmaier, Steve Kamin et al., "Preventing Deflation: Lessons from Japan's Experience in the 1990s," International Finance Discussion Papers, June 2002, (729). Board of Governors of the Federal Reserve System, Washington D.C.
2. Arne, Gary, "Reading the Money Fund Ratings," Business Week Online, December 5 2002. Available at www.businessweek.com/investor/content/ dec2002/ pi200215_7.
3. Auerbach, Alan J. and Maurice Obstfeld, "The Case for Open-Market Purchases in a Liquidity Trap," June 2003. Manuscript, Department of Economics, University of California, Berkeley.
4. Baumol, William J., "The Transactions Demand for Cash: An Inventory Theoretic Approach," Quarterly Journal of Economics, November 1952, 66, 546-56.
5. Bernanke, Ben and Mark Gertler, "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, Fall 1995, 9 (4), 27-48.
6. Black, Fischer, "The Pricing of Commodity Contracts," Journal of Financial Economics, January/March 1976, 3, 167-79.
7. Brunner, Karl and Allan Meltzer, "An Aggregative Theory for a Closed Economy," in Jerome L. Stein, ed., Monetarism, North Holland, Amsterdam, 1976, pp. 69-103.
8. Bryant, Ralph C., Gerald Holthman, and Peter Hooper, "Consensus and Diversity in Model Simulations," in Ralph C. Bryant, Dale W. Henderson, Gerald Holthman, Peter Hooper, and Stephen A. Symanski, eds., Empirical Macroeconomics for Interdependent Economies, The Brookings Institute: Washington D.C., 1988.
9. -, Peter Hooper, and Catherine L. Mann, eds, Evaluating Policy Regimes: New Research in Empirical Macroeconomics, The Brookings Institute, Washington D.C., 1993.
10. Buiter, Willem H. and Nikolaos Panigirtzoglou, "Liquidity Traps: How to Avoid Them and How to Escape Them," 1999. Author's web site: www.econ.cam.ac.uk/faculty/buiter/index.htm.
11. Cecchetti, Stephen, "The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates during the Great Depression," Journal of Political Economy, December 1988, 96 (6), 1111-41.
12. Chandler, Lester V., American Monetary Policy, New York, Evanston, San Francisco, London: Harper and Row, 1971.
13. Clouse, James, Dale Henderson, Athanasios Orphanides, David Small, and Peter Tinsley, "Monetary Policy When the Nominal Short-Term Interest Rate is Zero," Finance and Economics Discussion Series, 2000, 2000-51. Board of Governors of the Federal Reserve System, Washington D.C.
14. Coenen, Gunter and Volker Wieland, "The Zero-Interest-Rate Bound and the Role of the Exchange Rate for Monetary Policy in Japan," Carnegie Rochester Conference Series on Pubic Policy, 2003. Forthcoming, Presented to the Carnegie-Rochester Conference, November 21-22, 2002.
15. Cole, Harold L. and Narayana Kocherlakota, "Zero Nominal Interest Rates: Why They're Good and How to Get Them," Quarterly Review, 1998, Spring. Federal Reserve Bank of Minneapolis.
16. Eggertsson, Gauti and Michael Woodford, "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, 2003. Forthcoming.
17. Fedenia, M. and T. Grammatikos, "Options Trading and the Bid-Ask Spread of the Underlying Stocks," Journal of Business, July 1992, 65, 335-51.
18. Federal Reserve Board, Tenth Annual Report of the Federal Reserve Board: For the Year of 1923, Washington D.C.: Federal Reserve Board, 1924.
19. -, Banking and Monetary Statistics, Washington D.C.: Federal Reserve Board, 1943.
20. Federal Reserve Act And Other Statutory Provisions Affecting the Federal Reserve System (As Amended Through October 1998), Washington D.C.: Board of Governors of the Federal Reserve System, 1999. Copies may be obtained from Publications Services, Board of Governors of the Federal Reserve System, MS-138, Washington D.C., 20551.
21. Financial Services Institutions: Information for Assessing the Government's Potential Financial Exposure, Washington, D.C.: United States General Accounting Office, June 1998.
22. Fischer, Stanley, "Why are Central Banks Pursuing Long-Run Price Stability?," Achieving Price Stability, 1996. Federal Reserve Bank of Kansas City.
23. Fuhrer, Jeffrey C. and Brian Madigan, "Monetary Policy When Interest Rates are Bounded at Zero," Review of Economics and Statistics, November 1997, 79, 573-85.
24. - and Mark Schneiderman, eds, "Monetary Policy in a Low-Inflation Environment," November 2000, 32. Part 2, A special issue of the Journal of Money, Credit, and Banking.
25. Goodfriend, Marvin, "Overcoming the Zero Bound on Interest Rate Policy," Journal of Money, Credit and Banking, November 2000, 32, Part 2, 1007-1035.
26. Hackley, Howard H., Lending Function of the Federal Reserve Banks: A History, Washington, D.C.: Board of Governors of the Federal Reserve System, May 1973.
27. Hanes, Christopher, "The Liquidity Trap, the Supply of Reserves and U.S. Interest Rates in the 1930s," July 1999. Manuscript, Board of Governors of the Federal Reserve System, Washington D.C.
28. Henderson, Dale W. and Warwick J. McKibbin, "A Comparison of Some Basic Policy Regimes for Open Economies: Implications of Different Degrees of Instrument Adjustment and Wage Persistence," Carnegie-Rochester Conference Series on Public Policy, 1993, 39, 221-317.
29. Hicks, John, "Mr. Keynes and the 'Classics'," Econometrica, April 1937, 5 (2), 147-59.
30. Hull, John, Options, Futures, and Other Derivatives, third ed., Upper Saddle River, NJ: Prentice-Hall, 1997.
31. Johnson, Karen, David Small, and Ralph Tryon, "Monetary Policy and Price Stability," International Finance Discussion Papers, July 1999. Board of Governors of the Federal Reserve System,Washington D.C.. Prepared for a conference on Possibilities and Limitations of Monetary Policy, held on June 10-11, 1999 at the Austrian National Bank, Vienna, Austria.
32. Johnson, Karen, David Small, and Ralph Tryon, "Monetary Policy and Price Stability," International Finance Discussion Papers, July 1999. Board of Governors of the Federal Reserve System,Washington D.C.. Prepared for a conference on Possibilities and Limitations of Monetary Policy, held on June 10-11, 1999 at the Austrian National Bank, Vienna, Austria.
33. Kozicki, Sharon and P.A. Tinsley, "Term Structure Views of Monetary Policy Under Alternative Models of Agent Expectations," Journal of Economic Dynamics and Control, January 2001, 25, 149-84.
34. Krugman, Paul, "Japan's Trap," June 1998. Also see: Further Notes on Japan's Liquidity Trap. Author's web site: http://web.mit.edu/krugman/ www.
35. Krugman, Paul, "Japan's Trap," June 1998. Also see: Further Notes on Japan's Liquidity Trap. Author's web site: http://web.mit.edu/krugman/ www.
36. Lebow, David, "Monetary Policy at Near-Zero Interest Rates," Working Paper 136, July 1993. Economic Activity Section, Board of Governors of the Federal Reserve System, Washington D.C.
37. Lowell, Linda, "Mortgage Pass-Through Certificates," in Frank J. Fabozzi, ed., The Handbook of Mortgage Backed Securities, Probus Publishing, 1995.
38. Macaulay, Frederick, Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States Since 1856, New York: NBER, 1938.
39. Mark, Nelson, International Macroeconomics and Finance: Theory and Econometric Methods, Oxford, England: Blackwell Publishing, 2001.
40. McCallum, Bennett, "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates," Journal of Money, Credit and Banking, November 2000, 32, Part 2, 870-904.
41. McKinnon, Ronald, Allan Meltzer, and Kunio Okina, "Monetary Policy Under Zero Inflation-A Response to Criticisms and Questions Regarding Monetary Policy-Comments and Rejoinder," IMES Discussion Paper Series 99-E-28, July 1999. Institute for Monetary and Economic Studies, Bank of Japan. Available at www.boj.or.jp/en/ronbun/ronbun.htm.
42. Meltzer, Allan H., "The Transmission Process," March 1999. Manuscript, Carnegie Mellon University and the American Enterprise Institute.
43. -, "Japan's Monetary and Economic Policy," World Economics, July-September 2002, 3, 85-103.
44. Merton, Robert, "Financial Innovation and the Management and Regulation of Financial Institutions," Journal of Banking and Finance, June 1995, 19, 461-81.
45. Meulendyke, Ann-Marie, U.S. Monetary Policy and Financial Markets, Federal Reserve Bank of New York, 1998.
46. Mishkin, Frederick S., "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Paper, 1996, (5464).
47. Modigliani, Franco and Richard Sutch, "Innovations in Interest Rate Policy," American Economic Review, May 1966, pp. 178-97.
48. Monetary Policy and Reserve Requirements Handbook, Washington, D.C.: Federal Reserve Regulatory Service, Board of Governors of the Federal Reserve System, 2002.
49. Mullins, David, "Challenges for Monetary Policy in the Evolving Financial Environment," in I. Kuroda, ed., Towards More Effective Monetary Policy, New York: St. Martin's Press., 1997, pp. 99-129.
50. Mussa, Michael, "The Role of Official Intervention," Group of Thirty Occasional Papers, no. 6. New York: Group of Thirty, 1981.
51. Nikkie Net, BOJ WATCH: Call Market Sees Negative Interest Rates Again January 29, 2003. Available at www.nni.nikkei.co.jp.
52. -, MOF Wary About Possible Decline in BOJ Payments to Treasury March 21 2003. Available at www.nni.nikkei.co.jp.
53. Okina, Kunio, "Monetary Policy Under Zero Inflation-A Response to Criticisms and Questions Regarding Monetary Policy," IMES Discussion Paper Series, July 1999, (99-E-20). Institute for Monetary and Economic Studies, Bank of Japan. Available at www.boj.or.jp/en/ronbun/ronbun.htm.
54. Orphanides, Athanasios and Volker Wieland, "Price Stability and Monetary Policy Effectiveness when Nominal Interest Rate are Bounded at Zero," Finance and Economics Discussion Series, August 1998, 1998-35. Board of Governors of the Federal Reserve System, Washington D.C.
55. - and -, "Efficient Monetary Policy Design Near Price Stability," Journal of the Japanese and International Economies, 2000, 14, 327-65.
56. Patinkin, Don, "Price Flexibility and Full Employment," in Harold R. Williams and John D. Huffnagle, eds., Macroeconomic Theory: Selected Readings, Prentice Hall, Inc., 1951.
57. Phelps, Edmund S., Inflation Policy and Unemployment Theory, London: The MacMillan Press Ltd., 1972.
58. Reifschneider, David and John C. Williams, "Three Lessons for Monetary Policy in a Low Inflation Era," Financial and Economics Discussion Series (FEDS) 1999-44, August 1999. Board of Governors of the Federal Reserve System, Washington D.C.
59. Romer, Christina D., "What Ended the Great Depression?," The Journal of Economic History, December 1992, 52, 757-784.
60. Shiller, Robert J., "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, 1979, 87 (6), 1190-1219.
61. -, John Y. Campbell, and Kermit L. Schoenholtz, "Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates," Brookings Papers on Economic Activity, 1983, 1, 173-224.
62. Small, David and James Clouse, "The Limits the Federal Reserve Act Places on the Monetary Policy Actions of the Federal Reserve," Annual Review of Banking Law, 2000, 19, 553-79.
63. Stanton, Thomas H., A State of Risk: Will Government-Sponsored Enterprises Be The Next Financial Crisis?, Harper-Collins, 1991.
64. Stigum, Marcia, The Money Market, Homewood, Illinois: Dow Jones-Irwin, 1990.
65. Summary of Marketable Treasury Inflation-Indexed Securities, 1999. U.S. Treasury website address: www.publicdebt.treas.gov/of/ofinflin.htm.
66. Summers, Lawrence., "How Should Long-Term Monetary Policy Be Determined?," Journal of Money, Credit and Banking, 1991, 23 (3), 625-31.
67. -, "Comment: Why are Central Banks Pursuing Long-Run Price Stability?," Achieving Price Stability, 1996. Federal Reserve Bank of Kansas City.
68. Svensson, Lars E.O., "How Should Monetary Policy Be Conducted in an Era of Price Stability?," August 1999. Institute for International Economic Studies, Stockholm University.
69. -, "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies, 2001, 19, S1, 277-312.
70. -, "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, 2003. Forthcoming.
71. Taylor, John B., "Discretion Versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy, 1993, 39, 195-214.
72. Tetlow, Robert and John C. Williams, "Implementing Price Stability: Bands, Boundaries and Inflation Targeting," March 1998. Federal Reserve Board staff working paper.
73. Tinsley, Peter A., "Short Rate Expectations, Term Premiums, and Central Bank Use of Derivatives to Reduce Policy Uncertainty," Financial and Economics Discussion Series 1999-14, February 1999. Board of Governors of the Federal Reserve System, Washington D.C.
74. Tobin, James, "Commercial Banks as Creators of 'Money'," in Deane Carson, ed., Banking and Monetary Studies, Richard Irwin Inc., 1963.
75. -, "An Essay on the Principles of Debt Management," Fiscal and Debt Management Policies, 1963. Commission on Money and Credit.
76. -, "Money and Finance in the Macroeconomic Process," Journal of Money, Credit and Banking, May 1982, 14, 171-203. Nobel Lecture.
77. Turnbull, S. and L. Wakeman, "A Quick Algorithm for Pricing European Average Options," Journal of Financial and Quantitative Analysis, September 1991, 26, 377-89.
78. West, Robert Craig, Banking Reform and the Federal Reserve, 1863-1923, Cornell University Press, 1977.
79. Willis, H. Parker and William H. Steiner, Federal Reserve Banking Practice, New York: D. Appleton and Company, 1926.
80. Woelfel, Charles J., Encyclopedia of Banking and Finance, Chicago, Illinois: Probus Publishing Company, 1994.
81. Wolman, Alexander, "Real Implications of the Zero Bound on Nominal Interest Rates," Journal of Money, Credit, and Banking, 2003. Forthcoming.
82. Woodford, Michael, Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton, New Jersey: Princeton University Press, 2003. Forthcoming, See Chapter 2 transcript (December 2002 version) at www.princeton.edu/~ woodford.
83. World Economic Outlook, International Monetary Fund, October 1999.
84. WuDunn, Sheryl, "Zen Banking: Japan's Negative Interest Rates," New York Times, November 7, 1998, p. B1.
85. Yamaguchi, Yutaka, "Monetary Policy and Structural Policy: A Japanese Perspective," November 1999. Remarks by Yutaka Yamaguchi, Deputy Governor of the Bank of Japan, before Collaque Monetaire International at Banque de France, October 8-9, 1999. Available at www.boj.or.jp/en/press/press_f.htm.
86. Zuckerman, Gregory and Chikako Mogi, "T-Bills' Yield In Japan Shifts To The Negative," Wall Street Journal, November 6, 1998, p. C1.