Legal academics, journalists, and senior executive branch officials alike have assumed that the cost of imposing new regulatory requirements is higher in severe recessions that drive the central bank's policy rate to zero than in other times. This is not correct; the aggregate output costs of...

Legal academics, journalists, and senior executive branch officials alike have assumed that the economic costs of regulatory requirements go up in severe recessions that drive interest rates to zero. But this is not correct; the aggregate costs of regulatory requirements decrease, not increase,...