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When Interest Rates Hit the Zero Lower Bound: A Discussion on Uncertainty
Throckmorton, Nathaniel
Throckmorton, Nathaniel
Abstract
In December 2008, the financial crisis and the subsequent recession compelled the Federal Reserve to take unprecedented action to reduce the federal funds rate to its zero lower bound (ZLB). Hitting the ZLB was important
because the Fed lost its ability to respond to negative economic events with its traditional policy tool. Recent research has shown that the ZLB constraint can have undesirable effects on the economy. Our research shows the
constraint can also lead to greater uncertainty about the future economy as well as a much stronger relationship between uncertainty and economic activity.
Description
Date
2018-03
Journal Title
Journal ISSN
Volume Title
Publisher
LSE Business Review