Chattopadhyay, Siddhartha and Daniel, Betty C. (2015): Taylor-Rule Exit Policies for the Zero Lower Bound.
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Abstract
The monetary authority loses the ability to implement the Taylor Rule at the zero lower bound. However, the promise to implement a Taylor Rule upon exit remains an effective policy instrument. We present two Taylor-Rule exit policies, each with different commitment requirements, as alternatives to a truncated Taylor Rule. A Taylor Rule with an optimally-chosen exit date and time varying inflation target delivers fully optimal policy, but requires a negative inflation target, possibly threatening the ability to commit. A Taylor Rule with only an optimally-chosen exit date delivers almost all the gains of fully optimal policy with no need to commit to the negative inflation target.
Item Type: | MPRA Paper |
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Original Title: | Taylor-Rule Exit Policies for the Zero Lower Bound |
English Title: | Taylor-Rule Exit Policies for the Zero Lower Bound |
Language: | English |
Keywords: | New-Keynesian Model, Inflation Target, Liquidity Trap |
Subjects: | E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy |
Item ID: | 85215 |
Depositing User: | Dr. Siddhartha Chattopadhyay |
Date Deposited: | 12 Mar 2019 14:20 |
Last Modified: | 29 Oct 2024 12:19 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/85215 |
Available Versions of this Item
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Taylor-Rule Exit Policies for the Zero Lower Bound. (deposited 13 Aug 2015 15:53)
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Taylor-Rule Exit Policies for the Zero Lower Bound. (deposited 21 Jan 2016 14:29)
- Taylor-Rule Exit Policies for the Zero Lower Bound. (deposited 12 Mar 2019 14:20) [Currently Displayed]
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Taylor-Rule Exit Policies for the Zero Lower Bound. (deposited 21 Jan 2016 14:29)