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behaves as a negative wealth effect and generates an immediate decline in output, investment, and hours worked. The large drop … in investment then causes a gradual but very persistent decline in the capital stock. That protracted decline in the …
Persistent link: https://www.econbiz.de/10010662819
capital, but we also study the model with capital, with and without investment adjustment costs. Our solution method …
Persistent link: https://www.econbiz.de/10010628491
This paper examines the stimulative effect of central bank forward guidance—the promise to keep future policy rates lower than its policy rule suggests—when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).We utilize a standard New Keynesian model in which forward...
Persistent link: https://www.econbiz.de/10011027342
We use a dynamic stochastic general equilibrium model to address two questions about U.S. monetary policy: 1) Can monetary policy elevate output when it is below potential? and 2) Is the zero lower bound a trap? The model answer to the first question is yes it can, but the effect is only...
Persistent link: https://www.econbiz.de/10010558512
This article uses a DSGE framework to evaluate the role of monetary policy in determining the likelihood of encountering the zero lower bound. We find that the probability of experiencing episodes of being at zero lower bound depends almost exclusively on the monetary policy rule. A policy rule,...
Persistent link: https://www.econbiz.de/10010562442