Macroeconomic impact of zero lower bounds

Abstract

The zero lower bound presents a very tricky situation for the countries as one of the major ways to stimulate the economy or boost the expectation of households i.e. to decrease the interest rate becomes difficult. There has been a lot of academic research done in order to understand the kind of monetary and fiscal policy suitable for economies approaching/approached the ZLB. The central bank finds it difficult to implement appropriate monetary policy to come out of ZLB. This dilemma gives rise to the type of unconventional monetary policies that should be implemented as the conventional monetary policy during ZLB.