One unorthodox proposed method for dealing with it involves massive foreign currency purchases. Eggertson and Woodford argue that for open-market operations to be effective in this situation requires changing future expectations of policy. Consequently, one approach for deal
One unorthodox proposed method for dealing with it involves massive foreign currency purchases. Eggertson and Woodford argue that for open-market operations to be effective in this situation requires changing future expectations of policy. Consequently, one approach for dealing with it has been written about by Lars Svenson and involves an explicit central bank commitment to a future price level, also known as nominal GDP targeting. Another method for dealing with this problem is when the Treasury agrees to broaden its asset purchases, termed "quantitative easing." Paul Krugman has written about Japan's experience in this state, and has argued that the recent economic crisis is an instance of it. Occurring when consumers' preference for cash is greater than the supply of money, FTP, identify this macroeconomist state in which low or zero interest rates fail to stimulate consumer spending.
One unorthodox proposed method for dealing with it involves massive foreign currency purchases.
liquidity trap