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Monetary Policy When the Nominal Short-Term Interest Rate is Zero
Topics in Macroeconomics
In an environment of low inflation, the Federal Reserve faces the risk that real interest rates could remain elevated and that it was not providing enough monetary stimulus even though it had pushed the short-term nominal interest rate to its lower bound of zero. Assuming the nominal Treasury-bill rate had been lowered to zero, this paper considers whether further open market purchases of Treasury bills could spur aggregate demand through increases in the monetary base that may stimulatedoi:10.2202/1534-5998.1088 fatcat:slodubzjffe3lgw5jxifcy3toq