Open AccessTransmission mechanism of the Federal Reserve System’s monetary policy in the conditions of zero bound on nominal interest rates
Author(s) -
Dominika Brózda
Publication year - 2016
Publication title -
equilibrium
Language(s) - English
Resource type - Journals
eISSN - 2353-3293
pISSN - 1689-765X
DOI - 10.12775/equil.2016.034
Subject(s) - zero lower bound , liquidity trap , zero (linguistics) , economics , monetary policy , monetary economics , quantitative easing , curiosity , interest rate , keynesian economics , nominal interest rate , forward guidance , financial crisis , market liquidity , mechanism (biology) , inflation targeting , macroeconomics , credit channel , central bank , real interest rate , liquidity risk , philosophy , psychology , epistemology , social psychology , linguistics
The experience of Japan from the 90s of the twentieth century and the recent global financial crisis has shown that the zero lower bound problem has ceased to be a theoretical curiosity and became the subject of intense scientific discussion. This issue is closely linked with John Maynard Keynes’s liquidity trap. The phenomenon of the zero lower bound is very controversial. Not all economists agree that it may restrict the effectiveness of the central bank’s actions. The aim of the article is to present the views of economists on this transmission mechanism of monetary policy under the zero lower bound. The paper also attempts to evaluate the effectiveness of the Federal Reserve System’s monetary policy at zero nominal interest rates.