Werning, Iván - National Bureau of Economic Research (NBER) - 2011
. Inflation may be positive throughout, so the absence of deflation is not evidence against a liquidity trap. Output, on the other …I study monetary and fiscal policy in liquidity trap scenarios, where the zero bound on the nominal interest rate is … hand, always starts below its efficient level and rises above it. I then study fiscal policy and show that, regardless of …