U.S. Monetary Policy: Temporary Boost to Output, Zero Lower Bound Trap?
The article explores how U.S. monetary policy can impact the economy using a complex model. It shows that monetary policy can temporarily boost output, but this might not be beneficial in the long run. The zero lower bound on interest rates can be tricky, as the outcome depends on the specific policies in place. If interest rates are kept near zero for a long time, either inflation rates or real interest rates will eventually adjust. This analysis helps understand the potential effects of central bank decisions on the economy.