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Project Citation: 

Bernanke, Ben S., Kiley, Michael T., and Roberts, John M. Replication data for: Monetary Policy Strategies for a Low-Rate Environment. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-12-07.

Project Description

Summary:  View help for Summary In low-rate environments, policy strategies that involve holding rates "lower for longer" (L4L) may mitigate the effects of the effective lower bound (ELB). However, these strategies work in part by managing the public's expectations, which is not always realistic. Using the Fed's large-scale macroeconometric model, we study the effectiveness of L4L policies when financial market participants are forward-looking but other agents are not. We find that the resulting limited ability to manage expectations reduces but does not eliminate the advantages of L4L policies. The best policies provide adequate stimulus at the ELB while avoiding sizable overshoots of inflation and output.

Scope of Project

JEL Classification:  View help for JEL Classification
      E43 Interest Rates: Determination, Term Structure, and Effects
      E52 Monetary Policy
      E58 Central Banks and Their Policies

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