Abstract:The decline in the real interest rate during the recent few decades coupled with the Great Recession of 2007-2009 raised a concern that the U.S. economy might face stagnation like the Japanese economy since the late 1990s. The increased likelihood of the zero lower bound (ZLB) on the nominal interest rate that constrains the effectiveness of monetary policy at the low equilibrium real interest rate is often cited as a cause of stagnation. However, the central bank's unconventional policies such as large scale … Show more
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