The breakdown of the money multiplier at the zero lower bound

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Unconventional monetary policy intends to influence the economy at the zero lower bound. However, this policy becomes less effective due to a diminishing money multiplier in a liquidity trap. We show that this creates an extreme low interest rate, low multiplier regime. This insight contributes to the literature, which shows there is uncertainty over the effects of unconventional monetary policy and the precise channel through which it works.
Original languageEnglish
Pages (from-to)875-877
Number of pages3
JournalApplied Economics Letters
Volume21
Issue number13
DOIs
Publication statusPublished - 2014
Externally publishedYes

Keywords

  • interest rates
  • monetary policy
  • money multipliers

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