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The Zero Lower Bound on Nominal Interest Rates and Monetary Policy Effectiveness: a Survey

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Abstract

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.

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  1. Monetary and Economic Policy Department, De Nederlandsche Bank, PO Box 98, 1000 AB Am-sterdam, The Netherlands, and OCFEB Research Centre for Economic Policy (Erasmus University Rotterdam)

    C.A. Ullersma

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Ullersma, C. The Zero Lower Bound on Nominal Interest Rates and Monetary Policy Effectiveness: a Survey. De Economist 150, 273–297 (2002). https://doi.org/10.1023/A:1016113811607

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