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- Thomas I. Palley (2016): Zero Lower Bound (ZLB) Economics
This paper explores zero lower bound (ZLB) economics. The ZLB is widely invoked to explain stagnation and it fits with the long tradition that argues Keynesian economics is a special case based on nominal rigidities. The ZLB represents the newest rigidity. Contrary to ZLB economics, not only does a laissez-faire monetary economy lack a mechanism for delivering the natural rate of interest, it may also lack such an interest rate. Moreover, the ZLB can be a stabilizing rigidity that prevents negative nominal interest rates exacerbating excess supply conditions.
RePEc:imk:wpaper:164-2016 Save to MyIDEAS - Thomas I. Palley (2019): The fallacy of the natural rate of interest and zero lower bound economics: why negative interest rates may not remedy Keynesian unemployment
This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest rigidity in that pre-Keynesian tradition.
RePEc:elg:rokejn:v:7:y:2019:i:2:p151-170 Save to MyIDEAS - Thomas I. Palley (2018): The Fallacy of the natural rate of interest and Zero Lower Bound economics
This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest rigidity in that pre-Keynesian tradition.
RePEc:imk:fmmpap:38-2018 Save to MyIDEAS - Wataru Miyamoto & Thuy Lan Nguyen & Dmitry Sergeyev (2023): How Oil Shocks Propagate: Evidence on the Monetary Policy Channel
Using high-frequency responses of oil futures prices to prominent oil market news, we estimate the effects of oil supply news shocks when systematic monetary policy is switched off by the zero lower bound (ZLB) and when it is not (normal periods) in Japan, the United Kingdom, and the United States. We find that negative oil supply news shocks are less contractionary (and even expansionary) at the ZLB compared to normal periods. Inflation expectations increase during both periods, while the short nominal interest rates remain constant at the ZLB, pointing to the importance of monetary policy for oil shock propagation.
RePEc:fip:fedfwp:97925 Save to MyIDEAS - John C. Williams (2019): The research-policy nexus: ZLB, JMCB and FOMC: remarks at the Conference Celebrating the 50th Anniversary of the Journal of Money, Credit and Banking, Federal Reserve Bank of New York, New York City
Remarks at the Conference Celebrating the 50th Anniversary of the Journal of Money, Credit and Banking, Federal Reserve Bank of New York, New York City.
RePEc:fip:fednsp:321 Save to MyIDEAS - Pablo A. Cuba-Borda & Sanjay R. Singh (2023): Understanding Persistent ZLB: Theory and Assessment
We develop a theoretical framework that rationalizes two hypotheses of long-lasting low interest rate episodes: deflationary-expectations-traps and secular stagnation in a unified setting. These hypotheses differ in the sign of the theoretical correlation between inflation and output growth that they imply. Using the data from Japan over 1998:Q1-2019:Q4, we find that the data favor the expectations-trap hypothesis. The superior model fit of the expectations trap relies on its ability to generate the observed negative correlation between inflation and output growth.
RePEc:fip:fedfwp:97783 Save to MyIDEAS - Aleksandra Praščević & Milutin Ješić (2019): Modeling Macroeconomic Policymakers’ Interactions under Zero Lower Bound Environment: The New Keynesian Theoretical Approach
The paper examines how the implicit coordination mechanisms between the policymakers could help in overcoming negative macroeconomic consequences which are provoked by the problem of zero lower bound (ZLB) on the nominal interest rates. For the long period of time, before the global recession started, the ZLB problem was not found to be interesting for researchers. ... The theoretical approaches to the ZLB problem include many different aspects. ... We found that coordination between more passive monetary policymaker and more active fiscal policymaker is crucial in the ZLB environment. ... However, credible policymaking which is supported by the relevant institutions is a necessary precondition for implicit coordination, which substantially decrease the losses occurred as a consequence of ZLB on interest rates.
RePEc:cbk:journl:v:8:y:2019:i:1:p:5-38 Save to MyIDEAS - S. Boragan Aruoba & Pablo A. Cuba-Borda & Frank Schorfheide (2016): Macroeconomic Dynamics Near the ZLB : A Tale of Two Countries
We compute a sunspot equilibrium in an estimated small-scale New Keynesian model with a zero lower bound (ZLB) constraint on nominal interest rates and a full set of stochastic fundamental shocks. In this equilibrium a sunspot shock can move the economy from a regime in which inflation is close to the central bank's target to a regime in which the central bank misses its target, inflation rates are negative, and interest rates are close to zero with high probability.
RePEc:fip:fedgif:1163 Save to MyIDEAS - Xin, Baogui & Jiang, Kai (2023): Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis
Implementing a negative interest rate policy (NIRP) in the traditional fiat system is less effective than desired because of the zero lower bound (ZLB) constraint on interest rates and the cash barrier. ... The results suggest that: (i) The CBDC can eliminate the ZLB constraint and stabilize the economic fluctuations caused by NIRP.
RePEc:eee:riibaf:v:64:y:2023:i:c:s0275531923000272 Save to MyIDEAS - S. Boragan Aruoba & Pablo A. Cuba-Borda & Kenji Higa-Flores & Frank Schorfheide & Sergio Villalvazo (2020): Piecewise-Linear Approximations and Filtering for DSGE Models with Occasionally Binding Constraints
We use the techniques to estimate a small-scale DSGE model to assess the effects of the government spending portion of the American Recovery and Reinvestment Act in 2009 when interest rates reached the zero lower bound.
RePEc:fip:fedpwp:87720 Save to MyIDEAS