On this page, we examine short-run macroeconomic equilibrium and policy issues during severe economic downturns, including when the zero lower bound (zlb) constrains monetary policy makers.

Important: The material on this page requires that you have a basic knowledge of the short-run macro model, and especially the monetary policy relationship. To access this preparatory material, click on the button to the right.

This is Part I of a two part video on the Zero Lower Bound (zlb).

 

Highly Recommended: The video shows how the Real Taylor (RT) curve is expanded to include the zero lower bound on nominal interest rates that central banks face during extreme economic downturns and/or low inflation.

 

 

This is Part II of a two part video on the Zero Lower Bound (zlb).

 

Highly Recommended: The video shows how adverse shocks to demand and inflationary expectations can push the economy into zlb territory -- a territory that central bankers very much want to avoid.

Learn more about the Taylor Rule.

 

 

Highly Recommended: The spreadsheet based exercise and the video shows how to derive the RT curve -- including for ZLB territory.

This is the IS/RT/PC model that incorporates the  Zero Lower Bound (ZLB).

 

Highly Recommended: This spreadsheet can analyze both 'normal' times and extreme recessons -- when the ZLB constrains the central bank.

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