International policy spillovers at the zero lower bound

In this paper, we are interested in how the policy of other central banks affects policy in a small open economy in the face of a large global demand shock that leads central banks internationally to cut rates to the zero lower bound (ZLB). Our interest in this issue comes from the policy response t...

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Bibliographic Details
Published in:Bank of England quarterly bulletin 2012-10, Vol.52 (4), p.365-365
Main Authors: Haberis, Alex, Lipinska, Anna
Format: Article
Language:English
Subjects:
Central banks
Economic crisis
Economic models
Foreign exchange rates
Foreign policy
Global economy
Inflation
Interest rates
Monetary policy
Spillovers
Studies
World economy
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Summary:In this paper, we are interested in how the policy of other central banks affects policy in a small open economy in the face of a large global demand shock that leads central banks internationally to cut rates to the zero lower bound (ZLB). Our interest in this issue comes from the policy response to the financial crisis that started in 2007/08. This hit many economies at the same time, leading to large declines in output during what has become known as the 'Great Recession'. In response, central banks around the world cut policy rates to (close to) zero to offset the deflationary pressure associated with the collapse in demand.
ISSN:0005-5166
2399-4568