Benhabib, J.; Schmitt-Grohe, S.; Uribe, M. - C.V. Starr Center for Applied Economics, Department of … - 1999
Once the zero bound on nominal interest rates is taken into account, Taylor-type interest-rate feedback rules give rise to unintended self-fulfilling decelerating inflation paths and aggregate fluctuations driven by arbitrary revisions in expectations. These undesirable equilibria exhibit the...