New Tools Unveiled to Navigate Zero Lower Bound in Monetary Policy
The article discusses how to deal with low interest rates in the economy. By using shadow rate models, researchers found that U.S. monetary policy has been limited by low rates. In December 2012, it was predicted that rates would stay low for about 33 months. Including economic data in models helps predict future policy decisions. Overall, the policy in December 2012 was in line with what was expected based on simple rules.