scholarly journals Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero

2017 ◽  
Vol 49 (4) ◽  
pp. 585-602 ◽  
Author(s):  
JINILL KIM ◽  
SETH PRUITT
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Nominal Interest Rates

scholarly journals The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

2019 ◽  
Vol 11 (9) ◽  
pp. 2557
Author(s):  
Xiaoyu Zhang ◽  
Fanghui Pan
Keyword(s):  
Growth Rate ◽  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Policy Preferences ◽  
Output Gap ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Nominal Interest Rates

Although a large number of scholars have studied the policy preferences and monetary policy rules of China’s central bank, most have found no evidence that China’s central bank has adjusted the nominal interest rates against the output gap. By constructing the pseudo output gap defined by the deviation of the real output growth rate and the target growth rate, this paper finds that China’s central bank prefers to adjust the nominal interest rates against the pseudo output gap. The monetary policy preferences and rules of China’s central bank in different interest rate regimes are investigated based on the threshold Taylor rule model. It is found that, in the high-interest-rate regime, the central bank adjusts the nominal interest against the inflation gap and the pseudo output gap, while in the low-interest-rate regime, there is no evidence that the central bank adjusts the nominal interest rates against the pseudo output gap. The lower bound of interest rate reduction and the weakening of interest rate policy effects caused by the liquidity trap of the interest rate are the possible reasons for China’s central bank not to adjust the nominal interest rates against the pseudo output gap.

Monetary policy rules and the information content of the term structure of interest rates

2005 ◽  
Vol 12 (15) ◽  
pp. 933-936 ◽  
Author(s):  
Ralf Fendel ◽  
Michael Frenkel
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Information Content ◽  
Term Structure ◽  
Policy Rules ◽  
Monetary Policy Rules

scholarly journals Monetary policy special features in the context of low interest rates

2020 ◽  
Vol 2 ◽  
pp. 50-64
Author(s):  
Kristina Nesterova ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Price Level ◽  
Nominal Interest Rate ◽  
Inflation Target ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Monetary Rules

Introduction. The paper considers a wide range of monetary policy rules: integral stabilization, NGDP targeting, price level targeting, raising the inflation target, introducing negative nominal interest rates etc. The author also considers discretionary policy used by central banks when the nominal rate is close to zero, such as dramatic preventive cut of the key interest rate and interventions in the open markets with the aim of cutting long-term interest rates. The relevance of this problem is supported by global long-term macroeconomic and demographic factors, such as the dynamics of oil prices and the aging of the population. The aim of the paper is to identify the most effective monetary policy rules in order to reduce the risk of a nominal interest rate falling to zero. Methods. Analysis of the background and the results of general equilibrium models modeling monetary policy is carried out. Analysis of the role of current global trends (based on statistics) in aggravating the problem of declining interest rates. Scientific novelty of the research. The author systematizes the conclusions of modern macroeconomic theory, which offers a number of monetary rules making it possible to reduce the likelihood of falling into the zero bound of interest rate. Results. The effectiveness of monetary rules such as targeting nominal GDP and price levels in preventing the nominal interest rate from falling to zero is shown, primarily due to more efficient public expectations management which is a weak point of discretionary intervention. Conclusions. Under the current global factors for many developed countries and some oil-exporters, the downward trend in nominal rates persists. Combined with slowdown in economic growth, such threat may have negative consequences for the Russian economy. In this case, it seems reasonable to stick to the inflation target above 2% per year and in the future to consider switching to targeting the price level or nominal GDP.

scholarly journals Tying Down the Anchor: Monetary Policy Rules and the Lower Bound on Interest Rates

2019 ◽  
pp. 01-41 ◽  
Author(s):  
Thomas M. Mertens ◽  
◽  
John C. Williams ◽  
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
Policy Rules ◽  
Monetary Policy Rules

scholarly journals Monetary Policy Rules vs Discretion: Social Cost and Benefits

2021 ◽  
pp. 121-183
Author(s):  
Ioannis N. Kallianiotis
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Social Cost ◽  
Jel Classification ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Board Of Governors ◽  
The Social ◽  
High Inflation ◽  
Fed Funds Rate

Abstract In this article it is discussed the new monetary policy, the new instruments (monetary policy tools) that the Fed introduced after 2008 and 2020, the different monetary policy rules, and the social cost and benefits of this policy is measured. The first major Fed’s changes were on 12/20/2008 by altering the fed funds market in a number of different ways: (1) Zero fed funds rate. (2) The Fed started paying interest on reserves held by the bank or on behalf of depository institutions at Reserve Banks, subject to regulations of the Board of Governors, effective October 1, 2011 and interest on the overnight reverse repurchase agreement in 2014. (3) The close to zero deposit rates. (4) The Fed abolished the required reserves by making them since March 26, 2020 zero. The social cost is very high with these “innovated” policies. This zero federal funds target rate monetary policy is against depositors (bail in cost) and taxpayers (bail out cost); it is an unfair public policy and an anti-social monetary policy; and at the same time it is a risky one because it has created enormous bubbles in the stock market and a creeping high inflation. The different monetary policy rules reveal the unjustifiable low policy target rates. The latest monetary policy combined with the loss of self-sufficiency, the outsourcing, the unfair international trade, the recent peculiar coronavirus pandemic, and the current divisions inside the country are generating many challenges and risks for the future, which will cause the social cost to exceed the social benefits. JEL classification numbers: E52, E58, E4, E44, E23, D6. Keywords: Monetary Policy, Central Banks and Their Policies, Money and Interest Rates, Financial Markets and the Macro-economy, Production, Social Welfare.

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