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...

"We analyze optimal monetary policy in an endogenous sticky price model. Similar models with exogenous sticky prices can deliver multiplicity of equilibria. Multiplicity of equilibria is a necessary condition for expectation traps to explain the variation across time and countries of inflation...