A Norges Bank paper published on 1 July argues that policymakers' continued pledge to maintain interest rates low for extended periods has little, if no effect, on output.

Ragna Alstadheim, the paper's author, uses a neo-classical model of the Phillips curve with sticky prices, optimising agents and money in the utility function, to explain the how inflation expectations are formed when there is a zero lower bound on interest rates.

Results show that the zero lower bound is not a constraint on