ABSTRACT
Introduction Following the bankruptcy of LB in 2008, unprecedented worldwide panic on global financial markets prompted central banks to make aggressive interest-rate cuts to mitigate the collapse of aggregate demand, and prevent a deflationary spiral. The interest-rate cutting pace surprised most observers although central banks quickly hit the zero nominal interest bound that restricted their scope for manoeuvre. How do monetary policy committees conduct and communicate their policies when the short-term nominal interest rate is approaching the zero bound (Bernanke et al., 2004, p. 84)? This dark scenario precisely matches the situation encountered by central banks in the aftermath of the GFC. Indeed, the interest rate is the single most important policy instrument to achieve the objectives of the NMC. When it reaches zero, one thus refers to the zero bound on nominal interest rates.
