eggertsson and woodford (2003)

Eggertsson and Woodford (2003) have advanced a second argument for a price-level target for Japan in an important recent paper on monetary policy at the zero bound. Kenneth Kuttner By includes the authors (see e.g. Martin Feldstein In our model, optimal policy involves a commitment to adjust interest rates so as to achieve a timevarying price-level target, when this is consistent with the zero bound. Short- and Long-Term Interest Rates aan erany nited State nited ingdo Euroone −2.0 0.0 …

JEL No. Nonetheless, a credible commitment to the right sort of history-dependent policy can largely mitigate the distortions created by the zero bound.

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The consequences for the proper conduct of monetary policy of the existence of a lower bound of zero for overnight nominal interest rates has recently become a topic of lively interest. Nonetheless, a credible commitment to the right sort of history-dependent policy can largely mitigate the distortions created by the zero bound. Gauti B. Eggertsson , By

Michael Dotsey We use cookies to help provide and enhance our service and tailor content. Benjamin Friedman

Eggertsson and Woodford (2003), Christiano, Eichenbaum and Rebelo (2010).

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It's in his Jackson Hole paper, but the key reference is this 2003 paper by Eggertsson and Woodford.

By We also discuss ways in which other central-bank actions, while irrelevant apart from their effects on expectations, may help to make credible a central bank's commitment to its target, and consider implications for the policy options currently available for overcoming deflation in Japan. E52 We consider the consequences for monetary policy of the zero floor for nominal interest rates.

We also discuss ways in which other central-bank actions, while irrelevant apart from their effects on expectations, may help

We show, in the context of an intertemporal equilibrium model, that open-market operations, even of “unconventional ” types, are ineffective if they do not change expectations about the future conduct of policy; in this sense, a “liquidity trap ” is possible.