1 Gerard Dages, Jonathan McCarthy, and Paolo Pesenti assisted in preparing these remarks. 2 Specifically, the Earned Income Tax Credit and the Additional Child Tax Credit. 3 See, for example, Lawrence Summers, U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero  Lower Bound. 4 See, for example, some estimates based on the frequently-cited Laubach and Williams model. See Thomas  Laubach and John C. Williams (2003), “Measuring the Natural Rate of Interest,” Review of Economics and Statistics, v. 85, iss. 4, pp. 1063–70; Thomas Laubach and John C. Williams (2016), “Measuring the Natural 6/7  BIS central bankers' speeches  Rate of Interest Redux,” Business Economics, v. 51, iss. 2, pp. 57–67; and Kathryn Holston, Thomas Laubach and John C. Williams (2017), “Measuring the Natural Rate of Interest: International Trends and Determinants,” Journal of International Economics, Supplement 1, v. 108, pp. S59–75. 5 See Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under  their individual assessments of projected appropriate monetary policy, March 2018. 6 See Congressional Budget Office (2018), The Budget and Economic Outlook: 2018 to 2028, April 9, 2018. 7 See also William C. Dudley, The Outlook for the U.S. Economy and Beyond, January 11, 2018. 8 For a further discussion, see William C. Dudley, Making Globalization Work, March 1, 2018. 9 The costs of holding cash make possible the use of (slightly) negative interest rates—employed by some  countries outside the U.S. in recent years—as a result, the term “effective lower bound” is used here.
These include: 1) Determining the appropriate long-term implementation framework for U.S. monetary policy, and 2) deciding whether the strategic framework underlying monetary policy decisions needs to be adjusted to mitigate the risks associated with getting pinned at the effective lower bound for short-term interest rates.9 For the first issue, I see two options: return to the “corridor”-type system that was in place prior to the financial crisis, or remain with the framework that has been in place since the crisis— namely, a “floor” system. In a corridor system, reserves in the banking system are scarce, and the federal funds rate is set by adjusting the supply of reserves through open market operations to balance demand and supply at the FOMC’s target range. In contrast, in a floor system, reserves are abundant, so that the interest rate the Federal Reserve pays on excess reserves, or IOER, is the primary tool used to control the federal funds rate. In my view, the case for retaining the current floor system is very compelling for a number of reasons. First, it is operationally much less complex than a corridor system.