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Bryan Caplan points out that

Bryan Caplan points out that the liquidity gap doesn't really make sense if unusual policy instruments are available: "There is a simpler [way] to make monetary policy more expansionary when the nominal rate equals 0%. And that is to cut rates again. If the rate of monetary growth is too low when the interest rate is zero, pick the negative interest rate that gives you the rate of monetary growth you want."

Posted by Guan Yang on June 12, 2005 10:09 PM |

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