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Saturday, March 02, 2013

'Monetary Policy Alternatives at the Zero Bound: Lessons from the 1930s'

This paper from the SF Fed conference might be of interest (it's a bit technical in some sections):

Monetary Policy Alternatives at the Zero Bound: Lessons from the 1930s U.S. February, 2013 Christopher Hanes: Abstract: In recent years economists have debated two unconventional policy options for situations when overnight rates are at the zero bound: boosting expected inflation through announced changes in policy objectives such as adoption of price-level or nominal GDP targets; and large-scale asset purchases to lower long-term rates by pushing down term or risk premiums - “portfolio- balance” effects. American policies in the 1930s, when American overnight rates were at the zero bound, created experiments that tested the effectiveness of the expected-inflation option, and the existence of portfolio-balance effects. In data from the 1930s, I find strong evidence of portfolio- balance effects but no clear evidence of the expected-inflation channel.

(The discussants seemed to like the paper, but the results for expectations channel drew more questions than the results for the portfolio-balance effects.)

    Posted by on Saturday, March 2, 2013 at 12:24 AM in Academic Papers, Economics, Monetary Policy | Permalink  Comments (6)


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