The degree to which the lower bound on interest rates shifts has an important impact on inflation outcomes, according to a working paper published by the Bank of England.

Riccardo Masolo and Pablo Winant note the “zero lower bound” does not appear to have been either exactly zero or “absolutely constant” over time. But models taking account of the bound tend to treat it as fixed.

Instead, they model the effects of a “stochastic lower bound” (SLB) using a modified version of a “simple” New