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We consider the fiscal multiplier and spillover in an environment in which two countries are caught simultaneously in a liquidity trap. Using an optimizing two-country sticky price model, we show that the fiscal multiplier and spillover are contrary to those predicted in textbook economics. For...
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conversely implies that forecastability is higher in the preceding era, when the economy was unexpectedly volatile. We offer an …
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When a small open economy experiences a sufficiently large negative export shock, it is vulnerable to falling into a … zero bound trap. In addition, such a shock can have very large impact on the economy compared to the case when the zero …
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