The new-Keynesian liquidity trap
| Autor: | John H. Cochrane |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Inflation
Economics and Econometrics media_common.quotation_subject Keynesian economics 05 social sciences Deflation Recession Forward guidance jel:E12 Fiscal policy Liquidity trap Equilibrium selection 0502 economics and business New Keynesian economics Economics jel:E3 jel:E4 jel:E6 050207 economics Finance 050205 econometrics media_common |
| Zdroj: | Journal of Monetary Economics. 92:47-63 |
| ISSN: | 0304-3932 |
| DOI: | 10.1016/j.jmoneco.2017.09.003 |
| Popis: | In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. The model also makes unusual policy predictions: Useless government spending, technical regress, and capital destruction have large multipliers. These predictions become larger as prices become less sticky. I show that both sets of predictions are strongly affected by equilibrium selection. For the same interest-rate path, different choices of equilibria - either by the researcher's direct selection or the researcher's specification of expected Federal Reserve policy - can overturn all these results. A set of "local-to-frictionless" equilibria predicts mild inflation, no output reduction and negative multipliers during the liquidity trap, and its predictions approach the frictionless model smoothly, all for the same interest rate path. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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