In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment

Autor:	Piotr Ciżkowicz, Andrzej Rzońca, Andrzej Torój
Rok vydání:	2019
Předmět:	Slow potential Economics and Econometrics Labour economics media_common.quotation_subject Zero lower bound New Keynesian economics Economics Monetary economics Discretion Upper and lower bounds High inflation media_common
Zdroj:	German Economic Review. 20:e1028-e1053
ISSN:	1468-0475 1465-6485
DOI:	10.1111/geer.12203
Popis:	Using a standard New Keynesian model, we show that moderate side effects of zero lower bound (ZLB) policy suffice for positive lower bound (PLB) policy to pay off in terms of welfare, especially when central banks fail to commit. For given side effects of the ZLB, as the shock that makes the ZLB bind becomes larger and more persistent, the dominance of PLB policy over ZLB policy becomes more likely. The findings hold for flexible and rigid economies with both fast and slow potential output growth and low and high inflation targets.
Databáze:	OpenAIRE
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