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.
|Number of pages||3|
|Journal||Applied Economics Letters|
|Publication status||Published - 2014|
- interest rates
- monetary policy
- money multipliers