Język Polski
English
Published
:
2011-04-30
Zero Bound on the Nominal Interest Rates
Magdalena Musielak-Linkowska
Abstract
Stabilization of low rates of inflation, though desired and useful for an economy, can cause some problems and implications for interest rate policy of the monetary authority. Some economists see these problems as a zero bound on nominal interest rates. If the zero bound existed, then a shock large enough could even push the economy in a deflationary spiral. Many studies on the probability, that the monetary policy may become constrained by the zero lower bound on interest rate, can be found in the literature. In most studies the probability of encountering the zero bound is considered to be negligible for an inflation target of 2 per cent or more. However, for inflation targets between 0 and 1 per cent, the consequences of the zero bound become increasingly important and the frequency of time spent at the zero bound can rise up to 33%. The consequences of the zero bound constraint on the economic performance, measured as output and inflation variability, are negligible for an inflation target of 2 per cent or more, but become significant for inflation between 0 and 1 per cent. (original abstract)Keywords:
Interest rate, Monetary policy, Inflation, Monetary policy instrumentsSimilar Articles
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Musielak-Linkowska, M. (2011). Zero Bound on the Nominal Interest Rates. Zeszyty Naukowe Wyższej Szkoły Bankowej W Poznaniu, 33(33). Retrieved from https://journals.wsb.poznan.pl/index.php/znwsb/article/view/1499