We investigate how the Federal Reserve (Fed) hit the zero lower bound (ZLB) interest rate while operating under a Taylor-type policy rule. We estimate a reaction function and the results indicate that during the crisis Fed increased the weight on output without also increasing the weight on...

An investment bubble is a period of excessive, and predictably unpro…table, investment(DeMarzo, Kaniel and Kremer, 2007, p.737). Such bubbles most often accompany the arrival of some new technology, such as the tech stock boom and bust of the late 1990s and early 2000s. We provide a rational...