Fiscal policy is more potent near the eﬀective lower bound, but ﬁscal contraction more so than ﬁscal expansion. To characterize the economy in which the interest rate is near its effective lower bound, in this chart we now draw the LM curve as a convex function.
On February 9, 2012, we decided to lower the BI rate by 25 basis points to 5.75%. 47. However, the continuity of the counter-cyclical policy response was faced with the challenge of stronger inflation expectation in the midst of the uncertainty of the fuel price adjustment. 48. On that background, since March 2012, the BI rate was maintained at the level of 5.75%.