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That's what I'm saying. The paper was written in a time before interest payments on reserve balances, and it explicitly says that is one of the requirements for
by jnordwick 9y ago
That's what I'm saying. The paper was written in a time before interest payments on reserve balances, and it explicitly says that is one of the requirements for the paper to hold. We now pay interest on reserves, but I'm not sure what that entire policy is or how it works.
- jganetsk 9y agoThe paper still holds. It is saying that the natural rate of interest, i.e. the "base case", is zero. It mentions interest on reserves and bond issuance to drain reserves both as ways to "move away from the base case". It claims that, regardless of mechanism, we should justify our actions to move away from the base case. It also claims that the base case is a good policy for a variety of reasons.