The focus on monetary policy operations at the zero lower bound (ZLB) has been under the economist's microscope for the past decade. However, most of the focus is solely on applying the policy and its influences on macroeconomic variable, particularly inflation, since this is what concerns most major central banks most of the time. There are many works studied this with different methodologies that yield different results.
As mentioned earlier, the focus on inflation is understandable since most major central banks are tasked to achieve stable inflation, approximately around 2.0%. Nevertheless, the focus on inflation expectation at the moment is still lacking. The good news is, the emphasis on inflation expectation is starting to pick up some momentum.
Some might ask, why inflation expectation? Inflation expectation matters because it shows how businesses behave in determining their price for their goods and services and how the labour market sets its wages.
Therefore, in this case, I am narrowing down the research focus on how monetary policy operations at the ZLB influences inflation expectation. The diagram below illustrates the thought process of the whole framework.
