@techreport{NBERw7677,
 title = "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates",
 author = "Bennett T. McCallum",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7677",
 year = "2000",
 month = "April",
 URL = "http://www.nber.org/papers/w7677",
 abstract = {This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic stabilizing properties of Taylor rules in a ZLB context.  The  most important argument, however, is that if the short nominal rate is immobilized at zero, there nevertheless exists a route for monetary stabilization policy to be effective--- via the foreign exchange market. Its quantitative importance is examined in a calibrated, optimizing, open-economy model.},
}