Since U.S. bank capital holdings began rising almost concurrently with the monetary policy change after 2008, we examine the role of capital requirements for monetary policy regimes. While standard models predict that equilibrium determination and responses to aggregate shocks are fundamentally...

We study the optimal monetary policy problem in a New Keynesian economy with a zero lower bound (ZLB) on the nominal interest rate, when the steady state natural rate (r*) becomes permanently negative. We show that the optimal policy aims to approach gradually a new steady state with positive...

We study the optimal monetary policy problem in a New Keynesian economy with a zero lower bound (ZLB) on the nominal interest rate, when the steady state natural rate (r*) becomes permanently negative. We show that the optimal policy aims to approach gradually a new steady state with positive...