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| Author: | Orphanides, A. Wieland, V. |
| Title: | Efficient monetary policy design near price stability |
| Journal: | Journal of the Japanese and International Economies
2000 : DEC, VOL. 14:4, p. 327-365 |
| Index terms: | PRICES POLICY LIQUIDITY |
| Language: | eng |
| Abstract: | Using dynamic programming methods, the authors study the design of optimal monetary policy in a simple, calibrated open-economy model and evaluate the effect of the liquidity trap generated by the zero bound on nominal interest rates. The authors show that the optimal policy near price stability is asymmetric. As inflation declines, policy turns expansionary sooner and more aggressively than would be optimal in the absence of the zero bound. |
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