Orphanides and Wieland.

Orphanides and Wieland study the design of monetary policy in a low inflation environment, taking into account the limitations imposed by the zero bound on nominal interest rates. They focus on the portfolio balance channel through which changes in relative money supplies influence the exchange rate. They find that the optimal policy near price stability (close to zero inflation) is asymmetric: that is, as inflation declines, the policy turns expansionary more quickly and aggressively than would be optimal if there were no zero bound on nominal rates. As...