TY  - UNPD
A1  - Adam, Klaus
A1  - Billi, Roberto M.
T1  - Optimal monetary policy under commitment with a zero bound on nominal interest rates : [Version: May 7, 2004]
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2004,13
N2  - We determine optimal monetary policy under commitment in a forwardlooking New Keynesian model when nominal interest rates are bounded below by zero. The lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear. A calibration to the U.S. economy suggests that policy should reduce nominal interest rates more aggressively than suggested by a model without lower bound. Rational agents anticipate the possibility of reaching the lower bound in the future and this amplifies the effects of adverse shocks well before the bound is reached. While the empirical magnitude of U.S. mark-up shocks seems too small to entail zero nominal interest rates, shocks affecting the natural real interest rate plausibly lead to a binding lower bound. Under optimal policy, however, this occurs quite infrequently and does not require targeting a positive average rate of inflation. Interestingly, the presence of binding real rate shocks alters the policy response to (non-binding) mark-up shocks. JEL Klassifikation: C63, E31, E52 .
T3  - CFS working paper series - 2004, 13 
KW  - nonlinear optimal policy
KW  - zero interest rate bound
KW  - commitment
KW  - liquidity trap
KW  - New Keynesian
KW  - Geldpolitik
KW  - Zerobond
KW  - Nominalzins
Y1  - 2004
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4425
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-10647
IS  - This Version: May 7, 2004
ER  -