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...Executive summary Mainly economy faces challenges in maintaining a steady monitory policy. Nevertheless, the interest rates cannot be negative i.e. when there are down turns, the rate cannot be cut beyond zero. Main suggestions that have been given are use of Taylor rule. There are some three methods which can be used to get rid of zero lower bound on the nominal interest rates (Buiter, 2010. p.213). These include, abolishing currency, taxing currency, and then decouples the numeraire role of the currency from its means of payments (Buiter, 2010, p.214).
An easy model of the euro exchange economy can also be used to remove the lower bound which has an effect... Ways of overcoming zero lower bound...