Resource-rich economy faces reduced growth and volatility under Zero Lower Bound.
The article explores how to create optimal monetary policy rules for an economy heavily reliant on exporting resources when faced with the Zero Lower Bound. By using a model that considers trade conditions and external shocks, the researchers found that the Zero Lower Bound reduces the impact of positive external shocks, leading to higher real interest rates and lower consumption and production growth. The study suggests that adjusting monetary policy parameters can help minimize the risk of hitting the Zero Lower Bound and improve economic stability. In the case of Russia, the current monetary policy may have a higher chance of hitting the Zero Lower Bound compared to optimal policy rules.