Because the primary effect of the shock is to increase credit, it remains expansionary despite the fact that, due to the monetary policy rule, lower inflation triggers a drop in

Friedman recognized that real money demand responds nega- tively to its opportunity cost, which, assuming money pays zero interest (as was the case for currency and

Overall, the estimates of the Wordscores approach give a clear overview of the accommodative content of central banks’ forward guidance from 2009, and provide the prospects of the

We analyse the macroeconomic effects of a protracted period of low and falling inflation rates when monetary policy is constrained by the zero lower bound (ZLB) on nominal

Future increases in productivity or reductions in mark- ups triggered by supply-side policies generate a wealth e¤ect that pulls current consumption and output up.. Since the economy

We proceed as follows. First, we select parameter values. Second, we will introduce three variations of the benchmark economy. These variations will be helpful in interpreting

Future increases in productivity or reductions in mark-ups triggered by supply-side policies generate a wealth effect that pulls current consumption and output up.. Since the economy

New Keynesian DSGE model comprises three main elements: a consumption Euler equation that links interest rates to consumption and economic activity more generally; a New Key-

This non-existence result is a consequence of the fact that the expected aver- age policy rate rises with the level of uncertainty in the presence of the zero lower bound

In that case the zero lower bound is reached at the current rate of inflation and the economy gets trapped in a recession where inflation keeps falling, potentially moving

In that case the zero lower bound is reached at the current rate of inflation and the economy gets trapped in a recession where inflation keeps falling, potentially moving

As long as the fraction of the time in which the zero bound is a binding constraint is not too large, such rules achieve a substantially higher level of welfare than any

Model simulations imply that an additional 4 percentage points of rate cuts would have kept the unemployment rate from rising as much as it has and would bring the unemployment

The six variables are the short-term interest rate, the 10-year interest rate spread, the unemployment rate, the inflation rate, the growth rate of money, and the growth rate of

Since labor market tightness and the real wage are more elastic with respect to government spending at ZLB, real marginal cost reacts more than in normal times to a rise in

whose growth is affected by policy, two alternative forms of insurance against encountering the ZLB are available to an activist policy-maker: building a buffer of inflation and

Once the nominal interest rate reaches the zero lower bound (ZLB), monetary policy looses the ability to stimulate the economy by further reducing the nominal interest rate. Yet,

Once the nominal interest rate reaches the zero lower bound (ZLB), monetary policy looses the ability to stimulate the economy by further reducing the nominal interest rate. Yet,