Resumen de Risk management for monetary policy near the zero lower bound
Charles Evans, Jonas Fischer, François Gourio, Spencer Krane
As projections have inflation heading back toward target and the labor market continuing to improve, the Federal Reserve has begun to contemplate an increase in the federal funds rate. There is however substantial uncertainty around these projections. How should this uncertainty affect monetary policy? In standard models uncertainty has no effect. In this paper, we demonstrate that the zero lower bound on nominal interest rates implies that the central bank should adopt a looser policy when there is uncertainty. In the current context this result implies that a delayed liftoff is optimal. We first demonstrate theoretically this result using two canonical macroeconomic models. On the one hand, raising rates early might lead to excessively weak growth and inflation if the economic fundamentals turns out weaker than expected. On the other hand, raising rates later might lead to inflation if economic fundamentals are stronger than expected. Near the zero lower bound, monetary policy tools are strongly asymmetric and can deal with the second scenario much more easily than with the first. We next provide a quantitative evaluation of this policy using numerical simulations calibrated to the current environment. Finally, we present narratives from Federal Reserve communications that suggest risk management is a longstanding practise, and econometric evidence that the Federal Reserve historically has responded to uncertainty, as measured by a variety of indicators
