Issues Regarding the Use of the Policy Rate Tool

38 Pages Posted: 2 Sep 2020

See all articles by Jeffrey R. Campbell

Jeffrey R. Campbell

University of Notre Dame; Tilburg University

Thomas B. King

Federal Reserve Bank of Chicago

Anna Orlik

Board of Governors of the Federal Reserve System

Rebecca Zarutskie

Board of Governors of the Federal Reserve System

Date Written: August, 2020

Abstract

We review two nonstandard uses of the policy rate tool, which provide additional stimulus when interest rates are close to or at the effective lower bound—forward guidance and negative interest rate policy. In particular, we survey the use of these tools since the star otf the Great Recession, review evidence of their effectiveness, and discuss key considerations that confront monetary policymakers while using them.

JEL Classification: E32, E43, E44, E52, E58

Suggested Citation

Campbell, Jeffrey R. and King, Thomas B. and Orlik, Anna and Zarutskie, Rebecca, Issues Regarding the Use of the Policy Rate Tool (August, 2020). FEDS Working Paper No. 2020-70, Available at SSRN: https://ssrn.com/abstract=3684908 or http://dx.doi.org/10.17016/FEDS.2020.070

Jeffrey R. Campbell (Contact Author)

University of Notre Dame ( email )

United States

Tilburg University ( email )

Tilburg, 5000 LE
Netherlands

Thomas B. King

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Anna Orlik

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Rebecca Zarutskie

Board of Governors of the Federal Reserve System ( email )

20th Street and C Streets NW
Mailstop 155-B
Washington, DC 20551
United States
202-452-5292 (Phone)

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