TY  - JOUR
AU  - McCallum,Bennett T.
TI  - Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7677
PY  - 2000
Y2  - April 2000
UR  - http://www.nber.org/papers/w7677
L1  - http://www.nber.org/papers/w7677.pdf
N1  - Author contact info:
Bennett T. McCallum
Tepper School of Business, Posner 256
Carnegie Mellon University
Pittsburgh, PA 15213
Tel: 412/268-2347
Fax: 412/268-6830
E-Mail: bm05@andrew.cmu.edu
AB  - 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.
ER  -