Arbeitspapier

Avoiding 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 government's goals regarding the stability of output and prices. This paper proposes several fiscal and monetary policies that preserve the appealing features of Taylor rules, such as local uniqueness of equilibrium near the inflation target, and at the same time rule out the deflationary expectations that can lead an economy into a liquidity trap.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 1999-25

Klassifikation
Wirtschaft

Ereignis
Geistige Schöpfung
(wer)
Benhabib, Jess
Schmitt-Grohe, Stephanie
Uribe, Martin
Ereignis
Veröffentlichung
(wer)
Rutgers University, Department of Economics
(wo)
New Brunswick, NJ
(wann)
2000

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Benhabib, Jess
  • Schmitt-Grohe, Stephanie
  • Uribe, Martin
  • Rutgers University, Department of Economics

Entstanden

  • 2000

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