منابع مشابه
Liquidity Traps, Learning and Stagnation∗
We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output. To avoid this outcome we recommend a...
متن کاملAvoiding Liquidity Traps∗
Once the zero bound on nominal interest rates is taken into account, Taylor-type interest-rate feedback rules give rise to unintended self-fulfilling decelerating inflation paths and aggregate fluctuations driven by arbitrary revisions in expectations. These undesirable equilibria exhibit the essential features of liquidity traps, as monetary policy is ineffective in bringing about the governme...
متن کاملLiquidity traps with global Taylor Rules
An important theme in the writings of Jess Benhabib is the global stability of equilibrium in monetary economies. A key result emerging from his research is that Taylor-type interest rate feedback rules that are bounded below by zero can lead to unintended liquidity traps. The present paper shows that even if the interest rate rule is not bounded below by zero, that is, even if the government c...
متن کاملLiquidity Traps and Monetary Policy: Managing a Credit Crunch
We study a model with heterogeneous producers that face collateral and cash in advance constraints. These two frictions give rise to a non-trivial financial market in a monetary economy. A tightening of the collateral constraint results in a credit-crunch generated recession. The model can suitable be used to study the effects on the main macroeconomic variables and on welfare of each individua...
متن کاملLiquidity traps and expectation dynamics: Fiscal stimulus or fiscal austerity?
We examine global dynamics under infinite-horizon learning in New Keynesian models where the interest-rate rule is subject to the zero lower bound. The intended steady state is locally but not globally stable. Unstable deflationary paths emerge after large pessimistic shocks to expectations. For large expectation shocks that push interest rates to the zero bound, a temporary fiscal stimulus, or...
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ژورنال
عنوان ژورنال: European Economic Review
سال: 2008
ISSN: 0014-2921
DOI: 10.1016/j.euroecorev.2008.05.003