Yield Curve Control and Zero Interest Rate Policy in a Small Open Economy

At the zero lower bound, expected duration of interest rate policy has two dimensions which are key to understanding stance monetary policy: (i) actual communicated by central bank or private sector, and (ii) prescribed underlying rule—the rule that is in place normal times. In a small open economy, depends part on foreign economic conditions. including policy. A tightening abroad depreciates exchange rate, increases inflation shortens rule. We argue strategy like yield curve control aims pin down given risky when shocks can change