Janet L Yellen: Normalizing monetary policy - prospects and
perspectives
Speech by Ms Janet L Yellen, Chair of the Board of Governors of the Federal Reserve
System, at "The New Normal Monetary Policy," research conference sponsored by the
Federal Reserve Bank of San Francisco, San Francisco, 27 March 2015.
* * *
I would like to thank President Williams for his kind introduction and the Federal Reserve
Bank of San Francisco for inviting me to what promises to be a very stimulating and
important conference.
As you know, last week the Federal Open Market Committee (FOMC) changed its forward
guidance pertaining to the federal funds rate. With continued improvement in economic
conditions, an increase in the target range for that rate may well be warranted later this year.
Of course, the timing of the first increase in the federal funds rate and its subsequent path
will be determined by the Committee in light of incoming data on labor market conditions,
inflation, and other aspects of the current expansion.
In my remarks today I will discuss some factors that will likely guide our decisions as we
adjust the stance of monetary policy over time. I will also discuss why most of my colleagues
and I believe the return of the federal funds rate to a more normal level is likely to be gradual.
In doing so, I will address three questions. First, why does the Committee judge that an
increase in the federal funds rate target is likely to become appropriate later this year?
Second, how are economic and financial considerations likely to shape the course of
monetary policy over the next several years? And, finally, are there special risks and other
considerations that policymakers should take into account in the current environment?
Current economic conditions and the outlook
Before turning to these questions, however, let me first review where the economy is now
and where it's likely headed - a necessary backdrop for understanding why, after more than
six years of maintaining a near-zero federal funds rate and accumulating a large portfolio of
longer-term securities, the Committee is now giving serious consideration to beginning to
reduce later this year some of the extraordinary monetary policy accommodation currently in
place.
Although the recovery of the labor market from the deep recession following the financial
crisis was frustratingly slow for quite a long time, progress has been more rapid of late. The
unemployment rate has fallen markedly over the past few years and now stands at
5.5 percent, down from 10 percent at its peak. Payroll gains have averaged 275,000 per
month over the past year, well above the pace needed to sustain further declines in the
unemployment rate. Of course, we still have some way to go to reach our maximum
employment goal. The unemployment rate has not yet declined to the 5.0 to 5.2 percent
range that most FOMC participants now consider to be normal in the longer run. Involuntary
part-time employment remains high by historical standards. Labor force participation is still
somewhat lower than I would expect after accounting for demographic trends.1 And wage
growth continues to be quite subdued. But I think we can all agree that the recovery in the
labor market has been substantial.
I am cautiously optimistic that, in the context of moderate growth in aggregate output and
spending, labor market conditions are likely to improve further in coming months. In
particular, and despite the somewhat disappointing tone of the recent retail sales data, I think
consumer spending is likely to expand at a good clip this year given such robust
fundamentals as strong employment gains, boosts to real incomes from lower energy prices,
continued increases in household wealth, and a relatively high level of consumer confidence.
Of course, not all sectors of the economy are doing as well: dollar appreciation appears to be
restraining net exports, low oil prices are prompting a cutback in drilling activity, and the
recovery in residential construction remains subdued. But overall, I anticipate that real gross
domestic product is likely to expand somewhat faster than its potential in coming quarters,
thereby promoting further gains in employment and declines in the unemployment rate.
In assessing the actual strength of the labor market and the broader economy, we must bear
in mind that these very welcome improvements have been achieved in the context of
extraordinary monetary accommodation. While the overall level of real activity now appears
to be much closer to its potential than it was a year or two ago, the economy in an
"underlying" sense remains quite weak by historical standards, for the simple reason that the
increases in hiring and output that have been achieved thus far have required exceptionally
low levels of short- and longer-term interest rates, reflecting a highly accommodative stance
of monetary policy. Interest rates have been, and remain, very low, and if underlying
conditions had truly returned to normal, the economy should be booming. As I will discuss
shortly, this assessment concerning the underlying strength of real activity has important
policy implications.
While there has been considerable progress on the maximum employment leg of our dual
mandate, progress on the price stability leg has been notably absent. Inflation as measured
by the price index for personal consumption expenditures has been running below the
FOMC's longer-run goal of 2 percent for a number of years, and on a 12-month basis is
currently 1/4 percent. Some of the weakness in inflation likely reflects continuing slack in
labor and product markets. However, much of this weakness stems from the sharp decline in
the price of oil and other one-time factors that, in the FOMC's judgment, are likely to have
only a transitory negative effect on inflation, provided that inflation expectations remain well
anchored.
In this regard, I take comfort from the continued stability of survey measures of longer-run
inflation expectations. And although market-based measures of inflation compensation have
declined appreciably since last summer and bear close watching, I suspect that these
declines are primarily driven by changes in risk premiums and market factors that I expect to
prove transitory. On balance, I therefore think it is appropriate for monetary policy to remain
accommodative for some time, fostering an environment of tightening labor and product
markets that, together with stable inflation expectations, will help move inflation up to
2 percent over the medium term.
Why might an increase in the federal funds rate be warranted later this year?
The Committee's decision about when to begin reducing accommodation will depend
importantly on how economic conditions actually evolve over time. Like most of my FOMC
colleagues, I believe that the appropriate time has not yet arrived, but I expect that conditions
may warrant an increase in the federal funds rate target sometime this year. So let me spell
out the reasoning that underpins this view.
I would first note that the current stance of monetary policy is clearly providing considerable
economic stimulus. The near-zero setting for the federal funds rate has facilitated a sizable
reduction in labor market slack over the past two years and appears to be consistent with
further substantial gains. A modest increase in the federal funds rate would be highly unlikely
to halt this progress, although such an increase might slow its pace somewhat.
Second, we need to keep in mind the well-established fact that the full effects of monetary
policy are felt only after long lags. This means that policymakers cannot wait until they have
achieved their objectives to begin adjusting policy. I would not consider it prudent to
postpone the onset of normalization until we have reached, or are on the verge of reaching,
our inflation objective. Doing so would create too great a risk of significantly overshooting
both our objectives of maximum sustainable employment and 2 percent inflation, potentially
undermining economic growth and employment if the FOMC is subsequently forced to
tighten policy markedly or abruptly. In addition, holding rates too low for too long could
encourage inappropriate risk-taking by investors, potentially undermining the stability of
financial markets. That said, we must be reasonably confident at the time of the first rate
increase that inflation will move up over time to our 2 percent objective, and that such an
action will not impede continued solid growth in employment and output.
An important factor working to increase my confidence in the inflation outlook will be
continued improvement in the labor market. A substantial body of theory, informed by
considerable historical evidence, suggests that inflation will eventually begin to rise as
resource utilization continues to tighten.2 It is largely for this reason that a significant pickup
in incoming readings on core inflation will not be a precondition for me to judge that an initial
increase in the federal funds rate would be warranted. With respect to wages, I anticipate
that real wage gains for American workers are likely to pick up to a rate more in line with
trend labor productivity growth as employment settles in at its maximum sustainable level.
We could see nominal wage growth eventually running notably higher than the current
roughly 2 percent pace. But the outlook for wages is highly uncertain even if price inflation
does move back to 2 percent and labor market conditions continue to improve as projected.
For example, we cannot be sure about the future pace of productivity growth; nor can we be
sure about other factors, such as global competition, the nature of technological change, and
trends in unionization, that may also influence the pace of real wage growth over time. These
factors, which are outside of the Federal Reserve's control, likely explain why real wages
have failed to keep pace with productivity growth for at least the past 15 years. For such
reasons, we can never be sure what growth rate of nominal wages is consistent with stable
consumer price inflation, and this uncertainty limits the usefulness of wage trends as an
indicator of the Fed's progress in achieving its inflation objective.
I have argued that a pickup in neither wage nor price inflation is indispensable for me to
achieve reasonable confidence that inflation will move back to 2 percent over time. That said,
I would be uncomfortable raising the federal funds rate if readings on wage growth, core
consumer prices, and other indicators of underlying inflation pressures were to weaken, if
market-based measures of inflation compensation were to fall appreciably further, or if
survey-based measures were to begin to decline noticeably.
Under normal circumstances, simple monetary policy rules, such as the one proposed by
John Taylor, could help us decide when to raise the federal funds rate.3 Even with core
inflation running below the Committee's 2 percent objective, Taylor's rule now calls for the
federal funds rate to be well above zero if the unemployment rate is currently judged to be
close to its normal longer-run level and the "normal" level of the real federal funds rate is
currently close to its historical average. But the prescription offered by the Taylor rule
changes significantly if one instead assumes, as I do, that appreciable slack still remains in
the labor market, and that the economy's equilibrium real federal funds rate - that is, the real
rate consistent with the economy achieving maximum employment and price stability over
the medium term - is currently quite low by historical standards.4 Under assumptions that I
consider more realistic under present circumstances, the same rules call for the federal funds
rate to be close to zero.5 Moreover, I would assert that simple rules are, well, too simple, and
ignore important complexities of the current situation, about which I will have more to say
shortly.
The FOMC will, of course, carefully deliberate about when to begin the process of removing
policy accommodation. But the significance of this decision should not be overemphasized,
because what matters for financial conditions and the broader economy is the entire
expected path of short-term interest rates and not the precise timing of the first rate increase.
The spending and investment decisions the FOMC seeks to influence depend primarily on
expectations of policy well into the future, as embedded in longer-term interest rates and
other asset prices. More important than the timing of the Committee's initial policy move will
be the strategy the Committee deploys in adjusting the federal funds rate over time, in
response to economic developments, to achieve its dual mandate. Market participants'
perceptions of that reaction function and the implications for the likely longer-run trajectory of
short-term interest rates will influence the borrowing costs faced by households and
businesses, including the rates on corporate bonds, auto loans, and home mortgages.
3
For the original exposition of the Taylor rule, see John B. Taylor (1993), "Discretion Versus Policy Rules in
Practice," Carnegie-Rochester Conference Series on Public Policy, vol. 39, pp. 195-214. For a discussion of
policy rules in general, see John B. Taylor and John C. Williams (2010), "Simple and Robust Rules for
Monetary Policy," in Benjamin M. Friedman and Michael Woodford, eds., Handbook of Monetary Economics,
vol. 3B (San Diego: Elsevier), pp. 829-59.
4
The equilibrium real rate is typically viewed as the level of the short-term interest rate, less inflation, estimated
to be consistent with maximum employment and stable inflation in the long run, assuming no future
disturbances to the economy. Accordingly, the equilibrium real rate is usually thought of as independent of the
cyclical disturbances that routinely buffet the economy, on the assumption that the influences of such
disturbances on real activity and inflation fade away after a few years. In the aftermath of the financial crisis,
however, the U.S. economy has been subject to various adjustment processes that are unusually drawn out
by historical standards, such as the ongoing repair of household balance sheets and other persistent
headwinds. These atypical processes imply that, in determining the appropriate stance of monetary policy
over time, policymakers in the current environment need to take account of slow-moving influences on both
aggregate demand and supply that were not important factors during previous tightening episodes. For this
reason, it is useful to think of the equilibrium real rate in present circumstances as not only time-varying but
also having a predictable element that evolves over the medium term.
5
For example, the Taylor rule is Rt = RR* + πt + 0.5(πt -2) + 0.5Yt, where R denotes the federal funds rate, RR*
is the estimated value of the equilibrium real rate, π is the current inflation rate (usually measured
using a core consumer price index), and Y is the output gap. The latter can be approximated using Okun's
law, Yt = -2 (Ut - U*) , where U is the unemployment rate and U* is the natural rate of unemployment. If RR* is
assumed to equal 2 percent (roughly the average historical value of the real federal funds rate) and U* is
assumed to equal 5-1/2 percent, then the Taylor rule would call for the nominal funds rate to be set a bit below
3 percent currently, given that core PCE inflation is now running close to 1-1/4 percent and the unemployment
rate is 5.5 percent. But if RR* is instead assumed to equal 0 percent currently (as some statistical models
suggest) and U* is assumed to equal 5 percent (an estimate in line with many FOMC participants' SEP
projections), then the rule's current prescription is less than 1/2 percent.
How are economic and financial considerations likely to shape the course of monetary
policy over the next several years?
Let me therefore turn to the second question I posed earlier: How are economic and financial
considerations likely to shape the course of monetary policy over the next few years? Let me
first be clear that the FOMC does not intend to embark on any predetermined course of
tightening following an initial decision to raise the funds rate target range - one that, for
example, would involve similarly sized rate increases at every meeting or on some other
schedule. Rather, the actual path of policy will evolve as economic conditions evolve, and
policy tightening could speed up, slow down, pause, or even reverse course depending on
actual and expected developments in real activity and inflation. Reflecting such data
dependence, as well as some historically unusual policy considerations that I will discuss
shortly, the average pace of tightening observed during previous recoveries could well
provide a highly misleading guide to the actual course of monetary policy over the next few
years. Our goal in adjusting the federal funds rate over time will be to achieve and sustain
economic conditions close to maximum employment with inflation averaging around
2 percent, responding, as best we can, to the inevitable twists and turns of the economy.
Keeping in mind the all-important proviso that policy is never predetermined but is always
data dependent, what can we say about the appropriate path of policy, assuming the most
likely outcomes for real activity, inflation, and related factors? The answer is that it depends,
of course, on one's outlook for the economy. Today I will focus on the modal outlook
presented by FOMC participants' submissions to the March Summary of Economic
Projections (SEP), which assumes that no further unanticipated disturbances buffet the
economy. As I noted at my press conference after last week's FOMC meeting, participants
generally project that the unemployment rate will continue to fall through late 2017 to levels
at or somewhat below estimates of its longer-run sustainable level, accompanied by growth
in real gross domestic product that runs somewhat above its estimated longer-run trend with
inflation moving up to around 2 percent. This solid economic performance is projected to be
consistent with a gradual normalization of monetary policy: The median funds rate projection
in the March SEP increases a percentage point per year on average through the end of
2017.
The projected combination of a gradual rise in the nominal federal funds rate coupled with
further progress on both legs of the dual mandate is consistent with an implicit assessment
by the Committee that the equilibrium real federal funds rate - one measure of the
economy's underlying strength - is rising only slowly over time. In the wake of the financial
crisis, the equilibrium real rate apparently fell well below zero because of numerous
persistent headwinds. These headwinds include tighter underwriting standards and restricted
access to some forms of credit; the need for households to reduce their debt burdens;
contractionary fiscal policy at all levels of government after the initial effects of the fiscal
stimulus package had passed; and elevated uncertainty about the economic outlook that
made firms hesitant to invest and hire, and households reluctant to buy houses, cars, and
other discretionary goods.
Fortunately, the overall force of these headwinds appears to have diminished considerably
over the past year or so, allowing employment to accelerate appreciably even as the level of
the federal funds rate and the volume of our asset holdings remained nearly unchanged.6
Stated differently, the economy's underlying strength has been gradually improving, and the
equilibrium real federal funds rate has been gradually rising. Although the recent appreciation
of the dollar is likely to weigh on U.S. exports over time, I nonetheless anticipate further
diminution of the headwinds just noted over the next couple of years, and as the equilibrium
real funds rate continues to rise, it will accordingly be appropriate to raise the actual level of
the real federal funds rate in tandem, all else being equal.7 At present, the equilibrium real
federal funds rate, which by some estimates is currently close to zero, appears to be well
below the longer-run normal levels assessed by the FOMC. The median SEP estimate of this
longer-run normal rate - that is, the long-run projection of the nominal funds rate less
2 percent inflation - stood at 1-3/4 percent in the FOMC's recent projections.8 Provided that
inflation shows clear signs over time of moving up toward 2 percent in the context of
continuing progress toward maximum employment, I therefore expect that a further
tightening in monetary policy after the first increase in the federal funds rate will be
warranted. Should incoming data, however, fail to support this forecast, then the actual path
of policy will need to be adjusted appropriately.
Are there special risks and other considerations that policymakers should take into
account in the current environment?
As I noted, my FOMC colleagues and I generally anticipate that a rather gradual rise in the
federal funds rate will be appropriate over the next few years, conditional on our baseline
forecasts for real activity, inflation, and other aspects of the economy's performance. So far
in my remarks, I have emphasized one key rationale for such a judgment - namely, that the
equilibrium real federal funds rate is at present well below its historical average and is
anticipated to rise only gradually over time as the various headwinds that have restrained the
economic recovery continue to abate. If incoming data support such a forecast, the federal
funds rate should be normalized, but at a gradual pace.
Several additional factors reinforce this conclusion, and that brings me to my third question:
Are there special risks and other considerations that policymakers should take into account
in the current environment? Keeping in mind that the actual course of monetary policy in the
future will primarily depend on events as they unfold, I see three additional considerations
that are relevant.9
portfolio will be steadily falling and because the relative size of the portfolio to the stock of publicly held debt
will be shrinking.
7
If resource utilization was at a normal level and inflation was equal to 2 percent, policymakers would
presumably opt to set the real federal funds rate equal to the equilibrium real rate in order to maintain those
conditions. Accordingly, if the equilibrium rate is rising over time, the "neutral" setting of monetary policy
should be rising in tandem.
8
For example, the estimate of the equilibrium real rate from the Laubach-Williams model for 2014:Q4 is
negative 0.16. For information on the model, see Thomas Laubach and John C. Williams (2003), "Measuring
the Natural Rate of Interest," Review of Economics and Statistics, vol. 85 (November), pp.1063-70; updated
estimates of the baseline model are available on the Federal Reserve Bank of San Francisco website at
www.frbsf.org/economic-research/economists/john-williams/Laubach_Williams_updated_estimates.xlsx.
Another recent study, however, concludes that the equilibrium real rate is probably in the range of 1 to
2 percent while also emphasizing that estimates in this area are quite imprecise; see James D. Hamilton,
Ethan S. Harris, Jan Hatzius, and Kenneth D. West (2015), "The Equilibrium Real Funds Rate: Past, Present,
and Future (PDF)," working paper (San Diego: University of California at San Diego, March).
Note that the concept of the equilibrium real rate used in the latter study is explicitly long-run in nature and so
excludes the effects of forces that have persistently restrained the pace of the current expansion but are
expected to eventually fade away, such as household balance sheet repair; for this reason, the paper's
estimate is higher than the medium-run concept of the equilibrium real rate discussed in the speech.
9
In principle, the three considerations - uncertainty about the value of the equilibrium real federal funds rate,
the asymmetric risks associated with the zero lower bound on nominal interest rates, and the potential benefits
of allowing the unemployment rate to temporarily undershoot its sustainable longer-run rate - should influence
The first, which is closely related to my expectation that the headwinds holding back growth
are likely to continue to abate gradually, pertains to the risk that the equilibrium real federal
funds rate may not, in fact, recover as much or as quickly as I anticipate. Substantial
uncertainty surrounds all estimates of the equilibrium real interest rate, and, as I will discuss
momentarily, market participants appear to be fairly pessimistic about the odds that it will rise
significantly over time. Moreover, some recent studies have raised the prospect that the
economies of the United States and other countries will grow more slowly in the future as a
result of both demographic factors and a slower pace of productivity gains from technological
advances. At an extreme, such developments could even amount to a type of "secular
stagnation," in which monetary policy would need to keep real interest rates persistently quite
low relative to historical norms to promote full employment and price stability, absent a highly
expansive fiscal policy.10
Such a risk has important implications for monetary policy in the near term, when the ability
of the economy to adjust to significant rate increases will be especially uncertain. The
experience of Japan over the past 20 years, and Sweden more recently, demonstrates that a
tightening of policy when the equilibrium real rate remains low can result in appreciable
economic costs, delaying the attainment of a central bank's price stability objective.
International experience therefore counsels caution in removing accommodation until the
Committee is more confident that aggregate demand will continue to expand in line with its
expectations - a view that is also supported by the research literature.11
A second reason for the Committee to proceed cautiously in removing policy accommodation
relates to asymmetries in the effectiveness of monetary policy in the vicinity of the zero lower
bound. In the event that growth in employment and overall activity proves unexpectedly
robust and inflation moves significantly above our 2 percent objective, the FOMC can and will
raise interest rates as needed to rein in inflation. But if growth was to falter and inflation was
to fall yet further, the effective lower bound on nominal interest rates could limit the
Committee's ability to provide the needed degree of accommodation. With an already large
balance sheet, for example, the FOMC might be concerned about potential costs and risks
associated with further asset purchases.
both the timing of the onset of policy normalization and the subsequent pace at which that normalization
proceeds. And in fact, I view all three considerations as helping to explain why the FOMC has held the federal
funds rate near zero for so long. I also view such considerations as consistent with a likely increase in the
target federal funds rate later this year, because such an increase would be part of a broader strategy for only
gradually reducing accommodation over time (subject, of course, to adjustments in response to incoming
information on real activity, inflation, and other factors).
10
The concept of "secular stagnation" was first coined back in the late 1930s; see Alvin H. Hansen (1938), "The
Consequences of Reducing Expenditures," Proceedings of the Academy of Political Science, vol. 17
(January), pp. 60-72; and Alvin H. Hansen (1939), "Economic Progress and Declining Population Growth,"
American Economic Review, vol. 29 (March), pp. 1-15. This possibility, and its applicability to the United
States and other developed economies in coming years, has received considerable attention of late; see
Robert J. Gordon (2014), "The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections,"
NBER Working Paper Series 19895 (Cambridge, Mass.: National Bureau of Economic Research, February);
Robert E. Hall (2014), "Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis," in
Jonathan Parker and Michael Woodford, eds., NBER Macroeconomics Annual, vol. 29 (Chicago:
University of Chicago Press); and Lawrence H. Summers (2014), "U.S. Economic Prospects: Secular
Stagnation, Hysteresis, and the Zero Lower Bound," Business Economics, vol. 49 (April), pp. 65-73. For a
more skeptical assessment of the secular stagnation hypothesis, see Hamilton and others, "The Equilibrium
Real Funds Rate," in note 8.
11
A number of studies have shown, using model simulations, that policymakers can improve macroeconomic
performance by adjusting the stance of monetary policy more cautiously in response to changes in economic
conditions when the economy's equilibrium real interest rate is uncertain. For a survey of the literature on this
issue, see John B. Taylor and John C. Williams (2010), "Simple and Robust Rules for Monetary Policy," in
Benjamin M. Friedman and Michael Woodford, eds., Handbook of Monetary Economics, vol. 3B (San Diego:
Elsevier), pp. 829-59.
Research suggests that, the higher the probability of monetary policy becoming constrained
by the zero lower bound in the near future because of adverse shocks, and the more severe
the attendant consequences for real activity and inflation, the more current policy should lean
in accommodative direction.12 In effect, such a strategy represents insurance against the
zero lower bound by aiming for somewhat stronger real activity and a faster rise in inflation
under the modal outlook. Given the modal outlook envisioned in FOMC participants' recent
forecasts, with headwinds continuing to diminish, the equilibrium real rate rising, and inflation
moving back up to 2 percent over the next few years, the risk that the funds rate would need
to return to near zero should be declining appreciably. Consistent with this assessment,
almost all FOMC participants now view the risks to the outlook for real activity as largely
balanced, although some also see inflation risks as weighted to the downside.
That said, it is sobering to note that many market participants appear to assess the risks to
the outlook quite differently. For example, respondents to the Survey of Primary Dealers in
late January thought there was a 20 percent probability that, after liftoff, the funds rate would
fall back to zero sometime at or before late 2017.13 In addition, both the remarkably low level
of long-term government bond yields in advanced economies and the low prevailing level of
inflation compensation suggest that financial market participants may hold more pessimistic
views than FOMC participants concerning the risks to the global outlook. Since long-term
yields reflect the market's probability-weighted average of all possible short-term interest rate
paths, along with compensating term and risk premiums, the generally low level of yields in
advanced economies suggests that investors place considerable odds on adverse scenarios
that would necessitate a lower and flatter trajectory of the federal funds than envisioned in
participants' modal SEP projections.14
A final argument for gradually adjusting policy relates to the desirability of achieving a prompt
return of inflation to the FOMC's 2 percent goal, an objective that would be advanced by
allowing the unemployment rate to decline for a time somewhat below estimates of its
longerrun sustainable level. To a limited degree, such an outcome is envisioned in many
participants' most recent SEP projections. A tight labor market may also work to reverse
some of the adverse supply-side developments resulting from the financial crisis. The deep
recession and slow recovery likely have held back investment in physical and human capital,
restrained the rate of new business formation, prompted discouraged workers to leave the
labor force, and eroded the skills of the long-term unemployed.15 Some of these effects might
12
For example, see Klaus Adam and Roberto M. Billi (2007), "Discretionary Monetary Policy and the Zero Lower
Bound on Nominal Interest Rates," Journal of Monetary Economics, vol. 54 (3), 728-52; Taisuke Nakata
(2013), "Optimal Fiscal and Monetary Policy with Occasionally Binding Zero Bound Constraints (PDF),"
Finance and Economics Discussion Series 2013-40 (Washington: Board of Governors of the Federal Reserve
System, April); Taisuke Nakata (2013), "Uncertainty at the Zero Lower Bound (PDF)," Finance and Economics
Discussion Series 2013-09 (Washington: Board of Governors of the Federal Reserve System, December
2012); and Cha