What Else Can Central Banks Do?

Laurence Ball, Joseph Gagnon, Patrick Honohan, Signe Krogstrup 02 September 2016



Executive Summary


1 Introduction and summary


2 The dangers of the lower bound 

2.1 A look at recent history 
2.2 When will the constraint bind? A simple exercise 
2.3 Dynamic simulations 

3 How to ease monetary policy when rates hit zero

3.1 Negative interest rates 
3.2 Quantitative easing 
3.3 Helicopter money 
3.4 Forward guidance 
3.5 Beyond forward guidance: Committing to higher future inflation 
3.6 Policy mix, interactions and financial stability 

4 Raising the inflation target

4.1 Benefits of raising the inflation target 
4.2 Costs of a higher inflation target 
4.3 Credibility and the inflation target 
4.4 How to implement a new target 
4.5 What about a price level target?

5 Monetary policy in a post-cash economy

5.1 Markets are driving payments systems away from cash 
5.2 Monetary policy without cash 
5.3 Other policy aspects of post-cash economies

6 Conclusions: So what should be done?


Professor, Johns Hopkins University, and Research Associate, NBER

Senior Fellow, Peterson Institute for International Economics

Professor, Trinity College Dublin; Nonresident Senior Fellow; Peterson Institute for International Economics; CEPR Research Fellow

Member of the Board of Governors at Danmarks Nationalbank


CEPR Policy Research