Arbeitspapier
Expectations formation, sticky prices, and the ZLB
At the zero lower bound (ZLB), expectations about the future path of monetary or fiscal policy are crucial. We model expectations formation under level-k thinking, a form of bounded rationality introduced by García-Schmidt and Woodford (2019) and Farhi and Werning (2017), consistent with experimental evidence. This process does not lead to a number of puzzling features from rational expectations models, such as the forward guidance and the reversal puzzle, or implausible large fiscal multipliers. Optimal monetary policy at the ZLB under level-k thinking prescribes keeping the nominal rate lower for longer, but short-run macroeconomic stabilization is less powerful compared to rational expectations.
- ISBN
-
978-3-95729-626-9
- Sprache
-
Englisch
- Erschienen in
-
Series: Deutsche Bundesbank Discussion Paper ; No. 34/2019
- Klassifikation
-
Wirtschaft
Business Fluctuations; Cycles
- Thema
-
expectations formation
optimal monetary policy
New Keynesian model
zero lower bound
forward guidance puzzle
reversal puzzle
fiscal multiplier
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Bersson, Betsy
Hürtgen, Patrick
Paustian, Matthias
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2019
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Bersson, Betsy
- Hürtgen, Patrick
- Paustian, Matthias
- Deutsche Bundesbank
Entstanden
- 2019
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