Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Wang, Pengfei

2 Issues per year

IMPACT FACTOR 2017: 0.378
5-year IMPACT FACTOR: 0.462

CiteScore 2017: 0.62

SCImago Journal Rank (SJR) 2017: 0.553
Source Normalized Impact per Paper (SNIP) 2017: 0.605

See all formats and pricing
More options …

Monetary Policy When the Nominal Short-Term Interest Rate is Zero

James Clouse / Dale Henderson / Athanasios Orphanides / David H. Small / P.A. Tinsley
Published Online: 2003-09-24 | DOI: https://doi.org/10.2202/1534-5998.1088

In an environment of low inflation, the Federal Reserve faces the possibility that it may not have provided enough monetary stimulus even though it had pushed the short-term nominal interest rate to its lower bound of zero. Assuming the nominal Treasury-bill rate had been lowered to zero, this paper considers whether further open market purchases of Treasury bills could spur aggregate demand through increases in the monetary base. Such action may be stimulative by increasing liquidity for financial intermediaries and households; by affecting expectations of the future paths of short-term interest rates, inflation, and asset prices; through distributional effects; or by stimulating bank lending through the credit channel. This paper also examines the alternative policy tools that are available to the Federal Reserve in theory, and notes the practical limitations imposed by the Federal Reserve Act. The tools the Federal Reserve has at its disposal include open market purchases of Treasury bonds and certain types of private-sector credit instruments; unsterilized and sterilized intervention in foreign exchange; lending through the discount window; and, in some circumstances, may include the use of options.

Keywords: monetary policy; liquidity trap; zero bound; Federal Reserve Act; open market operations; discount window lending; options

About the article

Published Online: 2003-09-24

Citation Information: Topics in Macroeconomics, Volume 3, Issue 1, ISSN (Online) 1534-5998, DOI: https://doi.org/10.2202/1534-5998.1088.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston.Get Permission

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

Sanjit Dhami and Ali al-Nowaihi
Oxford Economic Papers, 2011, Volume 63, Number 4, Page 700
Christopher E.S. Warburton
Studies in Economics and Finance, 2013, Volume 30, Number 2, Page 80
Dehong Liu, Hongmei Gu, and Tiancai Xing
International Review of Economics & Finance, 2016, Volume 45, Page 504
Journal of Money, Credit and Banking, 2013, Volume 45, Number s2, Page 29
Jaime Marquez, Ari Morse, and Bernd Schlusche
Journal of Banking & Finance, 2013, Volume 37, Number 12, Page 5300
Kenneth A. Lewis and Laurence S. Seidman
Journal of Policy Modeling, 2008, Volume 30, Number 5, Page 751
Jun Nagayasu
Journal of International Money and Finance, 2007, Volume 26, Number 6, Page 887
Economic Record, 2011, Volume 87, Page 23
Ben S Bernanke and Vincent R Reinhart
American Economic Review, 2004, Volume 94, Number 2, Page 85
Arne Bigsten
The World Economy, 2005, Volume 28, Number 4, Page 595

Comments (0)

Please log in or register to comment.
Log in