Claude Lavoie

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December 11, 2007 The Zero Bound on Nominal Interest Rates: Implications for Monetary Policy

One of the most important factors that must be considered if countries are thinking about lowering the target level of inflation much below 2 per cent is the zero interest bound. Targeting inflation rates that are too low, the authors note, may restrict the ability of monetary policy to respond to economic shocks by limiting the amount by which interest rates can be eased.

The Zero Bound on Nominal Interest Rates: Implications for the Optimal Monetary Policy in Canada

Staff Discussion Paper 2007-1 Claude Lavoie, Hope Pioro
The authors assess the performance of the Canadian economy under a variety of interest rate rules when the zero bound on nominal interest rates can bind. Their assessment is based on numerical simulations of a dynamic stochastic general-equilibrium model in a stochastic environment. Consistent with the literature, the authors find that the probability and consequences […]

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