TY  - RPRT
A1  - Adam, Klaus
A1  - Billi, Roberto M.
T1  - Optimal monetary policy under commitment with a zero bound on nominal interest rates
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 imply positive average inflation rates in equilibrium. Interestingly, the presence of binding real rate shocks alters the policy response to (non-binding) mark-up shocks.
KW  - nonlinear optimal policy
KW  - zero interest rate bound
KW  - commitment
KW  - liquidity trap
KW  - New Keynesian
KW  - Geldpolitik
KW  - Nominalzins
KW  - Zerobond
Y1  - 2005
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/36054
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-360546
N1  - First Version: March 24, 2003, This Version: June 30, 2005
IS  - This Version: June 30, 2005
ER  -