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Foreign Exchange and the Liquidity Trap
Federal Reserve Bank of Cleveland, Economic Commentary (2003)
  • Will Melick
  • Owen F Humpage
Abstract
When short-term interest rates hover near zero, central banks may have difficulty offsetting downward momentum on prices and economic activity through traditional monetary policy channels, since commercial banks have little incentive to make loans. Economists refer to this situation as a liquidity trap. Do exchange rate targets and foreign exchange operations, as some have suggested, offer a way to escape such a trap?
Disciplines
Publication Date
October 1, 2003
Citation Information
Will Melick and Owen F Humpage. "Foreign Exchange and the Liquidity Trap" Federal Reserve Bank of Cleveland, Economic Commentary (2003)
Available at: http://works.bepress.com/will_melick/14/