Short-term Interest Rates as an Instrument of Policy Control by Central Banks

Under what circumstances might short term interest rates lose their potency as an instrument of policy control by central banks? What other monetary policy options are open to the leading central banks? What are the risks attached to the use of unconventional measures? This assignment finds answers to these questins by analysing possible situations where short-term interest rates might not be a suitable instrument of central bank policy, explaining how leading central banks have been dealing with these situations and points out risks attached. This essay has been marked with 73% at the Cardiff Business School - Department of Economics.